| By Tony Munroe and M.C. Govardhana Rangan
MUMBAI (Reuters) - As first-time buyers, Indian companies shopping abroad run the risk of overpaying or making the wrong purchases altogether.
Brimming with cash and confidence, Indian firms in industries from steel and car parts to pharmaceuticals and energy are for the first time in history looking overseas to tap new markets and buy brands, production and technology.
"The call is: Is there a bit of excessive confidence or exuberance in a few cases? There might be a few hiccups, but the trend of outbound acquisitions on a large scale is here to stay," said Vedika Bhandarkar, head of investment banking at JPMorgan (JPM.N: Quote, Profile , Research) in India.
The overseas march is spurred by strong earnings in an economy growing at 9 percent a year, easy credit and fewer regulatory hurdles.
Dangers include overpaying for control, taking on too much debt, and mishandling the challenges inherent in all takeovers: integrating the target company and making the sum better than the parts.
Given the sharp rise in Indian asset values, recklessly pricing acquisitions is the biggest risk -- a lesson Japanese companies learned the hard way in the late 1980s.
Hubris is another pitfall.
"When you have a lot of money, when you are feeling good in life, you can overextend. It is normal human nature. So far that's not the case," said Ratnesh Kumar, India strategist at Citigroup (C.N: Quote, Profile , Research).
BUYER'S REMORSE?
Talk of overextension arises as outbound M&A from India rocketed last year to $23.1 billion (11.9 billion pounds) from $4.47 billion in 2005, according to data provider Dealogic, with $10.7 billion worth of deals already this year -- or 60 percent of the total from Asia outside Japan.
"Having done small deals, things have gone well, so the corporate confidence of being able to do acquisitions on a much larger scale is much higher," Bhandarkar said.
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