Financial and Strategic Analysis of Potential M&A Targets in the Indian Water Industry

Rajaram, Ganesan (2012) Financial and Strategic Analysis of Potential M&A Targets in the Indian Water Industry. [Dissertation (University of Nottingham only)] (Unpublished)

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Metito Utilities Limited (MUL) is a Middle East based Water Treatment Company with a growth rate of 20% CAGR. The company‟s vision is to become a leading player in water and wastewater industry in emerging markets, such as: India, China and Africa. Metito specifically aspires to be a $700 million company and have a diversified risk and market share in developing nations within a span of five years. The company is keen on abiding by its vision and is looking for a potential acquisition target in India with a turnover of >US$ 50 million (Metito Business Plan, 2012).

Metito‟s Business Plan (2012) - Investment strategy:

- To diversify its geographic presence from middle east to emerging and rapidly growing economy – India, where the water industry is still in the nascent stage.

- To enhance its business in BOT (Build Operate and Transfer) and O&M (Operations & Maintenance) segments

- To gain project references from the acquired company in order to ensure and enhance its business value

The Indian Water industry, valued at US$4 bn, is estimated to grow at 15% annually. The water industry in India has a rapid growth potential due to the constant increase in demand. The Indian Water and wastewater treatment companies are under tremendous pressure to keep up with the growing demand. Due to the lack of design technologies and industry expertise in development of large scale water treatment plants, the Indian policy makers have amended foreign direct investment legislation to allow 100% investment into local wastewater treatment companies and Metito along with its expertise has a huge growth potential in India (India Infrastructure Research, 2011).

According to the company‟s sources, Metito has carried out an initial screening of companies in India based on the revenue >US$ 50 million. Among the targets, companies that are in EPC (Engineering, Procurement and Construction), BOT (Build Operate and Transfer) and O&M (Operations and Maintenance) with municipal and industrial clients are screened. This resulted in short listing three companies: VA Tech Wabag Ltd, Ion Exchange Ltd and IVRCL Ltd. The respective company analysis was carried out based on the companies‟ management, strategy, financial position and growth potential and are compared and contrasted with respect to Metito‟s investment strategy. As a result, VA Tech Wabag (CAGR 18%) is identified as the right fit for Metito and should be considered for further company valuation and due diligence. Given the circumstances, if needed, I recommend Ion Exchange (CAGR 6%) as Metito‟s second preference.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 07 Jan 2013 16:55
Last Modified: 26 Oct 2016 05:59

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