Indian firms’ investments in Europe may drop: FICCI


New Delhi : Indian corporates, which invested 2.4 billion euros ($3.35 billion) in European Union (EU) last year, are unlikely to pump in as much money in 2009 as they think it may take upto one year for Europe to recover from the slowdown, says a survey.

Support TwoCircles

“Indian investments in the EU during the current year may not reach the 2008 mark of 2.4 billion euros,” the survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) said.

About 40 percent of the respondents said they would make fresh investments in Europe depending on how fast the it recovers from the slowdown. It may take six to 12 months or more than that for the EU to be back on the growth track, they said.

The survey was conducted among companies that have invested in Europe in the past in various sectors like auto, energy, manufacturing, chemicals and IT and IT enabled services (ITeS).

In 2007, Indian corporates invested of 9.5 billion euros ($13 billion) to acquire EU-based companies. But due to the slowdown this figure dropped to 2.4 billion euros in 2008, according to Eurostat, the statistical office of the European Union.

The FICCI survey said this was expected to fall further this year.

“The companies which want to invest in EU are not willing to go for large sized buys. A majority of companies said the deal size they have in mind is less than $100 million on an average,” the report said.

“The reason for a cautious approach in terms of a longer time frame and smaller deal sizes could be because of the current economic environment but the fundamental reasons for investing in the EU still remain strong,” it added.

Till date, the most preferred sectors have been pharma, biotech, energy, manufacturing, auto and IT and ITeS.

About 60 percent of the respondents have reported that post acquisition, there has been a positive impact on their profitability.