JAN-MAR 2007 Vol 3 Issue12




India is fast dropping its tag of being a FDI destination and is emerging as a major foreign direct investor. The value of actual Indian investments abroad has increased from US$ 319 million to more than US$ 1450 million between 1999 to March 2004. According to UN Conference on Trade & Development (UNCTAD), India’s ranking improved from 80 to 54 during 1990 to 2004 in terms of outward FDI performance index covering 132 economies. 

In 2006, Indian companies raised $19 billion from global markets to finance foreign takeovers and internal expansion. This far exceeded the inflow of foreign direct investment (around $10 billion). 

The biggest takeover story of 2006 was Tata Steel's bid to take over Britain 's Corus (the outcome is still awaited). 

India has left behind the stage of being seen as a global supplier of software, generic drugs and auto components. It is now seen as a global managerial power, one that can take over multinationals across the world and improve their performance. So, global financiers are tripping over one other to fund foreign acquisitions by Indian companies.This new Indian image owes much to Lakshmi Mittal's success in acquiring and turning round steel plants in many continents, becoming global number one in steel. His key managers are mostly Indians. But Mittal is not an isolated example. Virtually every top Indian company in software, pharmaceuticals and auto has acquired foreign companies or set up greenfield factories abroad. Tata Tea acquired US energy drinks manufacturer Energy Brands for $677 m. Dr Reddy's Labs acquired Betapharm of Germany for $570 m. Suzlon acquired Eve Holdings of Belgium to become one of the world's top manufacturers of windmills. Ranbaxy acquired Romanian pharmaceutical producer Terapia for $324 m. Tata Coffee acquired US company Eight o'Clock Coffee for $220 m. These are just a few of the take overs of foreign firms by Indian companies while the actual numbers are significantly larger. 

India Inc has acquired such a good image that it matters less and less which Indian company is raising finance, for what purpose and in which country. Global finance is willing to back Indians to take over the world. 

Till recently, Indian businessmen were terrified of competing with China . But now a dozen Indian companies including Mahindra, Infosys and Sundaram Fasteners are investing in China , confident of beating the Chinese on their home-ground. This is only the beginning of the great Indian takeover. Indian companies should aim for the sky over the next two decades.



Breaking into the elite list of 'Fortune 500' companies is not about achieving revenues or market capitalisation but having a mindset of treating the entire globe as your arena, said Infosys chief mentor NR Narayana Murthy. He cites the example of consulting firm McKinsey where the multicultural nature of the workforce provides it the flexibility to deploy personnel in any location in the world.

Rajiv Memani, managing director, Ernst &Young India, says that although a few Indian companies like Indian Oil, Reliance Industries and Hindustan Petroleum have made it to the Fortune 500, they are not truly global leaders and their size is largely due to either state ownership or India's sheer demographics.

Tarun Khanna, Jorge Lehmann professor at the Harvard Business School, also agrees that Indian companies have to develop greater domestic delivery capabilities.

CULTURAL divide and adapting to management systems overseas are the primary limitations Indian companies face in expanding abroad, according to Prof Marti G. Subrahmanyam, Charles E. Merrill Professor of Finance and Economics, Stern School of Business, New York University. Addressing the golden jubilee convention of the Madras Management Association on overseas mergers and acquisitions on Saturday, he said that cultural integration is the main constraint for the globalisation of the Indian industry.

Mr Adil S. Zainulbhai, Managing Director, McKinsey & Co, said that a survey of fast growing Indian companies would show that expanding overseas is a major priority. But they are limited by the availability of managers overseas. Cultural integration is an issue, companies would rather send a "trusted executive" from India whether the person knows the business or not.

So, Indian companies still have a long way to go before they can be truly global.


Next topic for Volte-Face

Stem Cell Research – Should it be practiced or not? 

WASHINGTON, Jan. 11, 2007 — The House voted overwhelmingly on Thursday to broaden federal support for embryonic stem cell research, stepping up a confrontation with President Bush over a thorny scientific and ethical issue that Democrats hope to capitalize on in the next election.


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