Reverse colonialisation

Indian investment into the UK is poised to outstrip British investment in the sub-continent, reversing the flow of capital for the first time since the days of the Raj, the Sunday Telegraph reported.

India is presently ranked third, behind the US and Japan, in terms of investment into the UK. The 2005-2006 UK Inward Investment report shows a 111 per cent increase in Indian projects in the UK on the previous year - around $2bn worth - and the creation of over 1,000 new jobs. There are 23 Indian companies listed on London’s LSE, 13 of which are listed on the AIM. London is the most popular overseas exchange of Indian firms looking to raise capital.

And new research by Close Brothers Corporate Finance for The Sunday Telegraph suggests that by 2010, Indian companies will buy up 150 UK businesses, while British companies will acquire just 138 in India.

Close Brothers Corporate Finance managing director Richard Grainger said the still-strong cultural ties between the UK and India encourage investment. “We have a linguistic advantage here and in the US, while in countries like France and Germany there are employment issues around investing.”

Grainger points to Tata’s 2005 acquisition of UK technology business INCAT as a turning point in the investment trend. “That was the first sign of the wall of money coming out of India,” he told the newspaper.

If India’s acquisition spree continues on trend, the emerging market giant will buy 31 UK companies this year, almost double that to 52 next year, then push up to almost 90 corporate raids in 2009. In the same period -British companies will also increase investment in India, but by nothing like the same rate. From 50 acquisitions this year, UK companies are expected to pick up 99 companies in 2009, the Sunday Telegraph reported.

But Grainger had some words of comfort for British companies.

“There is a tipping point where things could start to move the other way again. India is growing rapidly and will soon need serious investment in its infrastructure. I can see at that point that British companies will start buying up assets there to be part of that investment.”

Soothing words, certainly, but would-be investors should note that even buyout behemoth Blackstone found India “challenging,” and other private equity companies have begun to spurn Indian companies. Even Walmart, which owns Asda, is finding its Indian debut more difficult than expected.

Meanwhile, India Inc is so self-assured it’s said to be eyeing Sainsbury’s…