If I say so, the acquisitions of companies abroad have become a fad for the Indian enterprises. While Tata Corus created a history, many of the business houses are finding this inorganic means of growth a cheaper and less troublesome way out. And why should it not be when the execution of any big project in India has become so difficult. Posco is an example and so are many, waiting for the acquisition of the land required for their projects. Unfortunately, the affected states are the poorest too- be it Chhattisgarh, Jharkhand, or Orissa. Even if half of the serious pending proposals get materialized, the economy of the states will get a real boost. I wonder why can’t the subject and a consensus on its solution become the national priority for all the political parties of India. Who are the people causing the problem: the crooks with vested interest or ignorant citizens? And perhaps this provides the answer to the question from many. Why are the big and small Indian business-houses are busy acquiring abroad instead of investing in new plants here?
A crack team of ‘Outlook Business’ correspondents worked for four months and put together ‘The Global 50′ in a special issue of February 23, 2008. Some of the data revealed and put forward are just exhilarating.
As on March 31, 2007, India’s top 50 multinationals employ about 124,000 people abroad and earn almost Rs 1,15,284 crore in revenues overseas. However, with the acquisitions of the current year, Indian multinationals may be on course to earning Rs 2,50,000 crore in revenues abroad and employing over 200,000 people overseas by the end of the financial year. Indian CEOs are busy building some truly transnational business model- produce where it is cheap to produce or produce where the customers are really available; hire talent where it is available and needed; mop up natural resources irrespective of where in the globe it was available, and of course keep on satisfying global customer with quality and services.
And interestingly, it is not only the IT or IT-related sector that are going global. Even manufacturing is going global and that too successfully. It surprises every one when a company such as Suzlon Energy takes Belgian gearbox maker Hansen Transmissions and multiplies its investment of Euro 371 million by five-fold to Euro 1.83 billion in just two years, making it one of India Inc’s most profitable global acquisitions. Hansen plans to expand its capacity from 3,200 MW to 15,000 MW. And to meet Hansen’s bottleneck in bearing supplies, as reported, Suzlon’s Tanti persuaded SKF bearings to set up dedicated plants in Vadodar and Chennai. Is it not something great for manufacturing India?
Today, Bharat Forge’s global manufacturing footprint spans eight companies, and as many manufacturing plants and 3,300 employees in six countries including Germany, Sweden, Scotland, US and China. Four of the companies acquired companies that were loss making are today profitable. Bharat Forge acquired the companies to keep its manufacturing in close proximity to customer location. Well over 50% of Bharat Forge’s consolidated revenues is now earned from its subsidiaries abroad. And the synergies of the global presence are bringing unprecedented cost reduction and innovation adding to the returns on the investment.
Tata Motors pioneered the buyout route for the manufacturing sector with its $102 million acquisition of Daewoo Motors’ commercial vehicle unit that made it product-wise globally competitive. Though with Indica, and now Nano, Tata Motors has made its presence felt, but the acquisition of Jaguar and Rover will make Tata Motors globally respected company.
Many Indian companies such as Mahindra and Mahindra, Videocon industries, Larsen & Toubro, Crompton Greaves, and even smaller ones such as Amtek Auto are trying to go global in big way. May be one day some of these companies will get into the list of the best few companies of the world. However, as an India baiter, I shall expect them to keep them expanding their India operation faster and faster to create employment and innovative world-class brand products too.