Caution is king in outbound India resources deals

By Joseph Chaney and Narayanan Somasundaram - Analysis

HONG KONG/MUMBAI (Reuters) - Indian resources giants such as Oil and Natural Gas Corp (ONGC.BO) are likely to hoard cash and shun big overseas deals despite market expectations they should seize distressed firms struggling in the financial crisis.

Financing difficulties and fears of making the wrong move in a dismal market with little pricing visibility are scaring Reliance Industries (RELI.BO) and other Indian firms away from large overseas targets, analysts say.

That's in stark contrast to rival China, whose state-backed firms are plowing billions into Australian resources this year, including aluminum giant Chinalco's $19.5 billion tie-up with Rio Tinto (RIO.AX)(RIO.L).

India was once expected to go toe-to-toe with China and scour the globe for quality mines, oil fields and other natural resources assets being sold on the cheap.

But that's far from the reality.

India's outbound resources acquisitions have fallen nearly 86 percent in the first quarter to just $170.7 million, Thomson Reuters data shows. In China, first quarter outbound resources acquisition volume is up nearly a third to $21.2 billion.

"Given the global liquidity situation and resources available to the companies, such strategic acquisitions have clearly taken a backseat," said Kamlesh Bagmar, a Mumbai-based analyst at Prabhudas Lilladher.

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