Acquisitive Indian companies turn the tables on the developed world
posted in Outsourcing News and Top Outsourcing deals |Source: www.iht.com
NEW DELHI: To understand India’s economic rise, look to its cars.
The iconic Indian automobile of a generation ago was the Ambassador, a noisy, boxy clunker that was ubiquitous despite its ungainly 1950s style.
Compare that to the newest Indian-owned line of cars, the famously sleek and sophisticated Jaguar, which the biggest Indian auto maker, Tata Motors, bought Wednesday, along with Land Rover, in a landmark $2.3 billion deal.
The vehicle upgrade could be a metaphor for the transformation the entire country has gone through in recent years, as the so-called “License Raj” - the stifling state-run socialist system widely blamed for shackling the Indian economy - came to an end, giving rise to a new middle class whose appetite for consumption has reshaped India and spurred a national economic boom.
Now, Indian companies are taking that money and shopping overseas for acquisitions as part of a strategy meant to announce India’s arrival on the global stage.
“It’s a matter of survival,” said Ashutosh Goel, an analyst with the brokerage firm Edelweiss Capital. “To succeed and thrive you have to be a serious global player and not only focused on the domestic market. You can’t remain a purely Indian player.”
Nearly all the leading corporations here - including Reliance Industries and the outsourcing company Wipro - are looking overseas, and reports of Indian acquisitions of U.S., European, and Asian brands have become common.
Many see the newfound assertiveness as a reflection of the general feeling in India that the once-stagnant underachiever now belongs among the international elite. “Indian companies have been in the mood for overseas purchases for a few years now and that coincides with the boom in the economy and the general feel-good factor here,” said Anjana Menon, an editor at Mint, a leading Indian business newspaper.
At the same time, the robust economy and looser regulations have attracted widespread foreign investment, increasing competition and forcing Indian companies to expand overseas to seek sales, analysts said.
Beyond Tata Motors, the crowded car market includes Maruti Suzuki - majority owned by Japanese automaker Suzuki Motors - Hyundai Motor of South Korea, Honda Motor of Japan and U.S. automakers Ford and General Motors.
International companies are interested in more than selling just cars, however. Coca-Cola, which was booted out of India in the 1970s to make way for the local brand Thums-Up, came back in 1993, after the economy opened to foreign investment, and now owns the former rival. In gleaming new malls across India, customers can select German washing machines, Korean air conditioners and Japanese televisions.
Tata, the country’s oldest and largest conglomerate, is the most striking example of an Indian company on an acquisition spree. With roughly 100 companies in everything from salt to software, it has led the charge that has made India an international player.
Tata has emerged from its own economic doldrums with high-profile moves like the purchase of the British steel maker Corus for $13 billion, as well as tea, hotel and automobile companies, sparking an outpouring of national pride. “The Empire Strikes Back!” was one of many headlines Thursday that trumpeted the purchase of Jaguar and Land Rover, brands founded in Britain, the former colonial power in India.
India’s economic rise can be traced back to 1991, when it began shifting toward a Western-style market economy. The boom was led by the outsourcing and technology sectors, which forged a connection between Indian companies and overseas markets.
The new opportunities gave rise to an educated and ambitious middle class, which has lustily embraced consumer culture. “The middle class Indian from a decade ago was more of a saver and he’s a spender now,” Menon said. “There’s a generational shift and there’s more money in people’s wallets and they’re freer to spend.”
Companies like Tata have reaped giant profits that freed them to pursue acquisitions. In five years to March 2007, annual group sales at Tata more than doubled to $29 billion, excluding Corus.
Tata announced the Land Rover and Jaguar acquisition with very little fanfare, apparently anticipating an anti-India backlash. In a sign of how times have changed, Indian companies that once lobbied the government for protection against foreign competition now find themselves battling protectionist sentiments abroad.
