London: Indian investment in Britain is poised to outstrip British investment in the subcontinent, reversing the flow of capital for the first time since the days of the Raj, says a new study.
According to exclusive research by Close Brothers Corporate Finance for The Sunday Telegraph, by 2010, Indian companies will buy up 150 British businesses a year, while British companies will acquire just 138 in India.
India's booming companies are increasingly willing to spend money abroad with Britain being a favourite target. Of 12.4 billion pounds in deals announced in the last five years, more than half - 6.8 billion pounds - was spent in Britain.
The research showed that other European countries lagged far behind for Indian investment with the next most popular, Germany, picking up just a billion pounds worth.
Close Brothers Corporate Finance managing director Richard Grainger, who recently signed a deal to add Bangalore boutique Allegro Capital Advisors to Close's international network, says the still-strong cultural ties between Britain and India encourage investment.
He told the Daily Telegraph: "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 British 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 said.
Tata eclipsed its own deal earlier this year when it won the 6 billion pounds battle for Corus, formerly British Steel and a one-time bastion of the FTSE's industrial core. Indian tea company Apeejay International also picked up Britain's Typhoo in 2005, taking tea back to India.
The research showed that if India's acquisition spree continues on trend, it will buy 31 British 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, British firms are expected to pick up 99 companies in 2009.
Grainger said: "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."
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