India has been ranked at the fourth position — after USA, UK and China – in the world’s most attractive investment destinations, as per a new report by global consulting firm Ernst and Young.
The 13th edition of the Capital Confidence Barometer states that even as the outlook for many emerging markets turns negative, investor sentiment toward India is seeing a significant recovery, with the country’s deal market expected to improve. The Indian Government’s pro-business stance and an increasingly promising economic outlook should foster a more benign investment landscape for inbound investment. Several positive macroeconomic factors are also burnishing India’s investment outlook. Low oil prices will help shrink the country’s import bill and narrow its current-account deficit. Easing inflation and looser monetary policy are expected to encourage consumer spending and investment. On the whole, India’s status among global investors as one of, if not the, most attractive emerging markets should also boost growth.
For consumer products and retail companies the focus remains on cost reduction, but they’ve got an eye on M&A as the engine for new growth, the report states. Among its key findings are the following:
- Consumer products and retail executives may still have one foot on the brake as they focus on cost reduction and operational efficiencies, but they see M&A as the engine for new growth.
- C-suite executives in the consumer products and retail sector are shedding non-core assets to save money and strategically deploy capital to more high-value initiatives.
- Consumer products and retail companies are looking to invest more in mature than emerging markets, a significant shift from 18 months ago.
- In the hunt for bigger deals, consumer products and retail companies have been making some bold M&A moves, but are they bold enough?
Consumer products and retail companies are focused on gaining market share in existing markets (28%) and gaining structural tax efficiencies (21%). They are also on the hunt for bigger deals, with one-third (32%) looking for upper-middle-market deals and 4% aiming even higher as they pursue deals greater than USD1b. Anheuser-Busch InBev’s blockbuster USD107.4b purchase of SABMiller — the largest ever deal in consumer products and retail — and the merger of HJ Heinz and Kraft Foods, creating a company with a combined revenue of USD28b, are two examples of consumer products companies buying for scale. At the same time, however, consumer products and retail companies are also overwhelmingly (73%) considering acquisitions that complement their existing business models, while nearly one-fifth (19%) are eyeing investments in niche areas to align their business with emerging trends.