Thursday, June 10th, 2004
It is perhaps too early to regard Flextronics' buyout of Hughes Network Systems' stake in Hughes Software Systems (HSS) as a signal that the confusion arising out of cross-talk on foreign investment has not scared away foreign investors.
What's undeniable, however, is that despite apprehensions about the climate for foreign investment under the UPA, a big foreign investor has invested a substantial sum of money.
The $14.5-billion Flextronics has acquired a 55% stake in Hughes Software Systems for a sum of $226 million (Rs 1,023 crore), amounting to an acquisition cost of Rs 547 per share. This is one of the largest cross-border deals to date in India . It was well known that Hughes Network Systems was scouting around to sell its stake in the Indian telecom software company. Originally promoted by Hughes Electronics Corporation, USA , the company fell into Rupert Murdoch's hands after News Corp acquired Hughes Electronic Corp for a consideration of $6.6 billion.
News Corp was primarily interested in getting hold of Direc TV, a satellite broadcaster. HSS never fitted into its scheme of things even though it has, of late, been a superlative performer. On the back of strong results and encouraging order book position its stock price has more than doubled in the last one year. Interestingly, Mr Murdoch, too, has substantially grown his money in an investment he did not want if we consider his acquisition cost to be equal to the previous year's open offer price of Rs 232!
True, one swallow does not make a summer. What is equally true, however, is that given a suitable environment, even more investment will flow into India . The Economist Intelligence Unit has estimated that investment flows into India could rise to $13 billion from $5 billion in 2003. All this is a clear indication of the fact that, as things go now, investors are not averse to investing in India. It is now up to Mr Chidambaram and his team to catch it before it disappears into other emerging markets.
Last updated :
June 10, 2004
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