Mumbai: Deals worth Rs 70,000 crore can be struck if the proposed disinvestment of state-owned companies in the fiscal 2003-04 and major mergers and acquisition deals are completed successfully, according to study done by the Centre for Monitoring Indian Economy (CMIE).

The disinvestment of public sector companies which, if followed by the open offers, would generate a minimum of Rs 11,000 crore. CIME estimates show that the privatisation of National Aluminium, Hindustan Petroleum, Bharat Petroleum and Maruti Udyog would generate around Rs 8,000 crore. Of this, the privatisation of National Aluminium and Hindustan Petroleum would be followed by open offers, entailing an additional amount of around Rs 3,000 crore.

Besides, the liberated environment in the banking and telecom industry would also lead to major mergers and acquisitions worth around Rs 50,000 crore, the CIME study says.

However, it said that the current economic uncertainty due to the prolonged economic slowdown along with the fallout of the Iraq war may lead to a major drop in the value of mergers and acquisitions, with an increased focus on consolidation and restructuring of existing businesses rather than an attempt for inorganic growth.

"The uncertain global scenario, the rising oil prices and oil shortage concerns, may even cause the government to postpone the disinvestment of its two navratnas engaged in refining of petroleum products, Hindustan Petroleum and Bharat Petroleum," the study says.

The mergers and acquisitions in the telecom industry is set to increase with the cabinet relaxing the non-transferability clause pertaining to the telecom licences on 25 March 2003. Telecom companies will now be able to transfer individual service licences. This was not possible earlier.

The licensee company was barred from creating any third party rights, and a lock-in period was prescribed during which the equity structure of the licensee company was not permitted to be changed, it added.

According to CMIE, the banking industry is expected to see higher mergers and acquisitions with the budget 2003-04 increasing the foreign direct investment (FDI) limit in the industry to 74 per cent from 49 per cent. This, accompanied by the removal on the restrictions of the 10 per cent cap on voting rights of shareholders of a bank, will put in motion a chain of events that would accelerate acquisitions in the banking arena.

The CIME study further says the disinvestments by the central government accounted for a major proportion of mergers and acquisitions values both in 2001-02 and in 2002-03. Disinvestment initiatives amounted to Rs 3,265 crore in 2002-03, a 10-per cent appreciation over the Rs 2,965 crore garnered by the government during the previous fiscal. Associated open offers for the privatised companies amounted to Rs 1,838 crore and to Rs 1,489 crore in 2001-02 and 2002-03, respectively.

It further said despite sluggish market conditions, there were 109 open offers aggregating Rs 5,464.7 crore completed during fiscal 2002-03, compared to 99 open offers aggregating to Rs 4,790.80 crore in the previous fiscal.