India billionaires go on buying spree in 'last frontier' Africa

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Bloomberg | 24 October 2010

Sai Ramakrishna Karuturi, founder and managing director of Karuturi Global Ltd. Photographer: John Sommers II/Bloomberg

By Mehul Srivastava and Subramaniam Sharma

Indian billionaire Ravi Ruia flew to Africa every month for the past 18 months, buying coal mines in Mozambique, half an oil refinery in Kenya and a call center in South Africa for his Essar Group.

This month, executives of his Essar Energy Plc. attended a conference hosted by Nigerian President Goodluck Jonathan to attract investors in the power grid. The officials, backed by $2 billion the company raised in an April listing on the London Stock Exchange, also mulled other “business opportunities” around Africa, the company said.

Ruia, who controls the $15 billion Essar Group with his older brother, Shashi, is not alone. Billionaire countrymen Sunil Mittal, chairman of India’s largest mobile phone provider, Bharti Airtel Ltd.; Adi Godrej, chairman of Godrej Consumer Products Ltd.; and Harsh Mariwala, founder of Marico Ltd., have fueled a $15.8 billion buying spree in Africa since January 2005.

“Africa looks remarkably similar to what India was 15 years ago,” said Firdhose Coovadia, director of Essar’s African operations. “We can’t lose this opportunity to replicate the low-cost, high-volume model we’ve perfected in India.”

‘Last Frontier’

Indian companies acquired or invested in at least 79 companies in Africa, chasing business in less crowded markets after growing in a home economy that expanded by an average 8.5 percent since April 2005.

Africa’s gross domestic product expanded 4.9 percent a year from 2000 to 2008, McKinsey & Co. said in a June report. The continent’s GDP will rise to $2.6 trillion by 2020 from $1.6 trillion in 2008.

Consumer spending may double to as much as $1.8 trillion by 2020 as infrastructure is built and farm output increases, the report said. That is the equivalent of adding a consumer market the size of Brazil.

“Africa is seen by the investing community as the last frontier,” said Walter Rossini, who manages $330 million in an India fund at Aletti Gestielle Sgr Spa in Milan. “There is a higher risk, but then there is greater reward if the political situation remains stable over the next 10 years.”

Africa is new territory for Bharti, which paid $9 billion in June for mobile phone operations in 15 countries and will rebrand them by year’s end.

500 Million Roses

This month, Bharti executives sought advice at the Kenya offices of Bangalore-based Karuturi Global Ltd., the world’s largest rose-grower. Sai Ramakrishna Karuturi, the managing director, said Africa is driving his company’s success.

Six years ago, as he struggled to compete against flower growers in Africa and Europe with lower freight costs and larger tracts of land, he bought a small plot in Ethiopia. Sales since have grown 11-fold to $112.7 million in the fiscal year that ended March 31.

He leases 311,000 hectares of land -- larger than the U.S. state of Rhode Island -- in Ethiopia and Kenya, and his company sells more than half-a-billion roses a year.

“I got in on the ground floor, others got in on the second floor, but there’s a lot of floors left to go in Africa’s economic cycle,” Karuturi said. “Africa offered us a scale we could never reach in India.”

26 Deals

Indian acquisitions in Africa peaked in 2008, when companies closed 26 deals worth $3.1 billion. Those include the state-run Indian Farmers Fertiliser Cooperative Ltd.’s $721 million purchase of Industries Chimiques du Senegal, an idle phosphates producer that once was the country’s largest industrial plant. New York-based Ernst & Young LLP handled 11 deals since 2005.

“We are seeing Indian companies look at Africa in a major way,” said Anuj Chande, the London-based head of the South Asia Group at advisory and accounting firm Grant Thornton U.K. LLP. “Compared to India, valuations are quite attractive. We’re expecting to see a lot of midsize deals across a variety of sectors.”

Apollo Tyres Ltd., India’s second-biggest tiremaker by market value, bought Durban, South Africa-based Dunlop Tyres International Pty for $62 million in April 2006. That gave Gurgaon-based Apollo two manufacturing plants and a retreading unit in South Africa and Zimbabwe, and brand rights to 32 African countries.

‘Tata, Ambani’

“If tomorrow the Indian economy was to take a U-turn, then at least you have other markets which are growing,” said Neeraj Kanwar, Apollo’s vice-chairman and managing director. “I can’t survive on the Indian market alone.”

The company aims to triple sales to $6 billion in five years, with 60 percent of revenue coming from outside India. In the fiscal year that ended March 31, 62 percent of its $1.7 billion in sales came from India.

Adi Godrej bought a hair-color company in South Africa and a soap and body-lotion maker in Nigeria. His Mumbai-based Godrej Consumer Products gets 23 percent of its total sales outside India, including Africa.

Marico paid 520 million India rupees ($12 million) to buy the consumer division of Durban-based Enaleni Pharmaceuticals Consumer Division (Pty) Ltd. in October 2007. Two months ago, it bought South African health-care brand Ingwe for an undisclosed price.

Dabur India Ltd. started shopping on the continent in 2004, when it bought a hair-care brand in Egypt and then a Nigerian cosmetics company.

“We need to now seek avenues of growth outside of India because India’s becoming saturated and hugely competitive,” Dabur Chief Executive Officer Sunil Duggal said.

One reason why smaller Indian companies ventured into Africa is that their budgets still attract attention in countries trying to woo foreign investors, Karuturi said.

“I am not even a fly on the wall in India, but in Ethiopia I am the largest investor, the second-largest employer after the government,” said Karuturi, whose company owns professional soccer and volleyball teams. “To do that in India, you have to be a Tata or an Ambani.”

To contact the reporters on this story: Mehul Srivastava in Mumbai at [email protected]; Subramaniam Sharma in New Delhi at [email protected]

To contact the editor responsible for this story: Bret Okeson at [email protected]
Original source: Bloomberg
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3 Comments


  1. Ras Ta (Zimbabwe)
    30 Oct 2010

    Land reform is a must. A more equitable distribution of land to the poor as well as the end of subsidized agriculture in developed nations at the expense of farmers and citizens in the edeveloping world..

  2. Chimurenga Zimbabwe
    29 Oct 2010

    If you're really that concerned about "land grabbing" and its effects on the rural poor why doesn't your website highlight and expose the criminal conduct of Robert Mugabe ... ? Here the latest in that sad and sorry tragedy: http://www.iol.co.za/news/africa/zim-s-white-farmers-face-new-violence-1.689781 Zim's white farmers face new violence October 29 2010 Harare - A Zimbabwean white farmers' organisation said they had seen a “renewed onslaught” of farm seizures and attacks, including the slayings of two farmers, in recent weeks. Deon Theron, head of the Commercial Farmers Union that represents Zimbabwe's dwindling number of white farmers - some 300 whites still hold farmland - said on Thursday that the attacks followed an announcement last month from President Robert Mugabe that scheduled a constitutional referendum and national elections early next year. He said police and security authorities have refused to act against a new wave of “violence, evictions and occupations” in the build-up to polling. That “signals the start of a renewed onslaught against rural communities” by Mugabe's loyalists, Theron said in a statement. In several districts “hired thugs” broke into homesteads and locked the owners out, leaving them with nothing but the clothes they were wearing, the statement said. Mugabe last month vowed to call elections next year to end the nation's shaky coalition with his longtime rival, Prime Minister Morgan Tsvangirai. The troubled power-sharing deal is due to expire at the two-year mark, in February. Mugabe said it won't be extended by more than a few weeks until elections can be held. Two farmers have died in robberies and at least three have been forced from their homes in the Banket district, 100km northwest of Harare, in the past two weeks. In the early hours of darkness on Monday, intruders killed prominent farmer Kobus Joubert, 67, by shooting him in the head at point-blank range at his home in that district. The intruders attacked his wife, ransacked the house and stole money and cellphones. The couple were illegally evicted from the farm by militants in 2008 but later won a court order allowing them to return. Smallholder farmer Tim Chance was killed in an ambush with his own firearms stolen by intruders in an earlier raid on his home in the Somabhula area, near the central city of Gweru. Theron, head of the farmers' organisation, said military officers also took over a farm in the eastern Nyazura district. He said the farm's owner, 73-year-old Tiennie van Rensburg, on Thursday was still trying to remove farm equipment and other goods. Theron said a colonel visited the farm and told the owner to leave within 72 hours or be evicted by the army. When van Rensburg also obtained court papers protecting him, “a group of eight thugs was sent to the farm around midnight to remove the owners. They beat up van Rensburg's guard and then, armed with his gun, gave the couple 10 minutes to vacate the property”, the statement said. Two farms owned by German and French investors have also been seized despite bilateral investment protection agreements. Claims by another 13 evicted farmers of Dutch origin for compensation under investment agreements between Zimbabwe and the Dutch government have been dismissed by Zimbabwean courts. About 4 000 white farmers have been forced from their farms since 2000, disrupting the agriculture-based economy in the former regional breadbasket. Many prize farms went to Mugabe cronies and still lie idle. Government comment was not immediately available, but in the past Mugabe's party and security agencies have denied reports of violent farm seizures. Mugabe insists the takeovers were to correct colonial-era imbalances in land ownership and blames the economic meltdown on Western sanctions targeting him and his party elite for perpetrating violations of human and democratic rights. - Sapa-AP

  3. Ethiopian
    28 Oct 2010

    poor Africa!

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