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JANUARY 14, 2007
 Letter From
 Message From
The Prime Minister
 Editor's Letter
 The Great Indian
M iddle Class
 India'S Poor
 The Next 15 Years

Flying High
The Indian aviation industry is growing at a rapid pace, thanks to air transport deregulation, emergence of new operators, lower fares and large untapped demand for air travel. The numbers tell an interesting story: India will require an estimated 1,100 aircraft. The average annual passenger traffic growth in India through 2025 is estimated at 7.7 per cent, well above the world average of 4.8 per cent and China's 7.2 per cent.

Bars Of Gold
The global gold industry is flourishing, largely fuelled by Asian demand and a weak US dollar. The boom is probably only halfway through since prices bottomed out in 2000. Since 1800, the boom and bust cycles have averaged about 10 years. While production is down, the value of gold purchased today is up 47 per cent from a year ago. The super-cycle of high metal prices is seen to be spurred largely by demand from China and India. An analysis.
More Net Specials
Business Today,  December 31, 2006
Going, Going... Gone Global

In the next 15 years, India Inc. will be a name to reckon with all over the world-and many more foreign transnational giants would have bought their way into a still piping-hot domestic market.

At the beginning of 2006, if any pundit was to venture that Tata Steel would be willing to fork out $10 billion for Europe's second-largest steel maker, or that Ranbaxy would have concluded eight overseas acquisitions in the year, his predictions would have put legendary prophets like Nostradamus in the shade. With India Inc having adopted a dynamic and aggressive global mindset, prophesising what lies ahead in the next 15 years can prove a hazardous task, not because those educated guesses might prove to be pie in the sky, but because they might pan out much earlier than expected. For instance, how many years would it take for an Indian auto giant to buy out a global car maker-two, three, five, seven...or will an Indian it services outsourcer pole-vault in the global Big Six by 2020, or will that happen much earlier...or will the Tata label become a global name in households, rubbing shoulders with the Apples and Googles of the world in 15 years or 10 (assuming the latter two are still around then)? Hmm, these are tough questions to which only time has the answer. But that doesn't stop bt from putting on its soothsayer hat and embarking on the risk-fraught exercise of looking at what lies in store for corporate India in the next one-and-a-half decade.

Spreading wings: Suzlon's Belgian acquisition

First-generation Entrepreneurs will Venture Abroad

Indian business houses will doubtless be flourishing in every continent-built either organically, or by acquisitions, or by buying out erstwhile partners in joint ventures. Emboldened by their success, first-generation entrepreneurs (amongst them a handful of management grads) will take baby steps abroad to start up ventures of their own. Says Subhash Chandra, Chairman, Zee group: "If Indians can succeed as entrepreneurs in India, why cannot first-generation entrepreneurs succeed abroad by setting up businesses there?" Chandra knows what he's talking about. In the late eighties, before he started Zee TV, he saw an opportunity in laminated tubes, for which he set up Essel Propack. Over the years, the company either built or bought manufacturing capacities overseas, and today 73 per cent of Essel's sales are coming from foreign geographies.

Many more made-in-India brands will become acceptable in many more developed markets in the years ahead
The last few years have seen Indian companies take bold steps to enter the global markets

A big boost for prospective entrepreneurs will come post-2012, by when the country would hopefully have moved into a regime of full capital account convertibility. This would pave the way for free flow of capital to and from foreign markets. Indian entrepreneurs will be attracted to countries that have low-tax and low-interest rate structures, and the right infrastructure. For instance, today Jignesh Shah, a first-generation entrepreneur, has set up a commodity exchange in Dubai, in partnership with the government of Dubai and the Dubai Multi-Commodity Centre. Shah sensed an opportunity in a critical time zone advantage between the European markets and the Middle East. More entrepreneurs will spot similar prospects in the years ahead.

Made in India will be a Brand to Reckon with Globally

The last few years have seen Indian companies in almost all sectors, be in steel, beverages, automobiles, textiles, banks or hotels, take bold steps to enter the global markets via mergers and acquisitions. For instance, acquisitions by the Tatas, of enhanced water company Glaceau and of hotel Ritz Carlton in the us, as well as Daewoo Commercial Vehicles in Korea, indicate that global companies are less reluctant today to sell to Indian promoters. Even a smaller company like GHCL has made inroads in the US by acquiring Dan River, the third largest home textiles maker. S. Kumars is said to be looking at America Pacific, another player in the same space. The bigger challenge now, however, for Indian companies is to take their brands into global markets, and sell them to foreign consumers. Mahindra & Mahhindra (M&M), for instance, I attempting exactly that, by selling its tractors and utility vehicles in the US. Many more made-in-India brands will become acceptable in many more developed markets in the years ahead.

FOREIGN TALENT: Indian Hotels' Raymond Bickson, Jet Airways' Wolfgang Prock Schauer, and Tata Teleservices' Darryl Green

Indian BPOs will Become Global Powerhouses

Indian business process outsourcing (BPO) companies, which made a success of their businesses by being low-cost centres for voice-based processing work for global companies, are waking up to the importance of setting up delivery and work centres closer to their clients' offices across the globe. While the move, for now, will help them tackle the issues of geographic risk, process related sensitivities, timeline alignment and cultural affiliation, it could, in times to come, lead to the creation of global BPO companies. Take for instance Firstsource, which has delivery centres in the us and Northern Ireland, the Infosys BPO, which has centres in Czech Republic and China, or HCL Technologies, which has offices in UK and Malaysia. For now, the reason for setting up onshore centres is predominantly a requirement for expertise in the local language, but if Indian companies can set up and run offices outside India, there is no reason why they cannot replicate the business model for many more companies across the globe, helping them set up delivery centres, and thus themselves become global companies. "Clients have realised that the Indian offshore centres have capabilities of process disciple and process improvement, which are lacking in their onshore operations, and they want us to replicate these qualities in their onshore centres," said Ananda Mukherji, CEO and MD, Firstsource, in a recent interview to BT.

Global Professionals will be all over Indian Companies

Already, domestic promoters are hiring foreign talent, particularly in sunrise sectors. Naresh Goyal's Jet Airways has Austrian national Wolfgang Prock Schauer as its CEO. There are two more foreign professionals in the Jet's senior management team-Garry Kingshott, an Australian and Werner Borchert, a German. This trend of having global professionals at the helm is expected to accelerate in the years to come as cross-border acquisitions gain momentum. Also, an increasing number of professionals will opt to work in a rapidly-growing economy like India, even as growth in their countries of origin slows down to a crawl.

"A global CEO brings in rich experience of various geographies, regulations and also a global perspective to a company. I think cross-border exchange of professionals will be a big trend," believes Jignesh Shah, Chairman & Managing Director, Financial Technologies (India). Shah has roped in Lamon Rutten, a former UNCTAD professional, as a joint managing director.

Core Competence will be Back in Fashion

India Inc Steps Out

Tata Tea's acquisition of UK-based Tetley accelerated the overseas acquisition trend in early 2000. Soon after Reliance took over Flag Telecom, VSNL bought Tyco, Tata Steel purchased NatSteel... the list goes on
Global game: (L to R) Tata Tea's Percy Siganporia, Energy Brands' Darius Bikoff, and Tata Tea Vice-Chairman R.K. Krishna Kumar

If India Inc has to make a mark on the global stage, it needs to build size, and scale. And one way of doing it is to stick very close to the knitting. For instance, Tata Steel, with its bid for Corus, has amply displayed its ambitions to be a sizeable force in global steel. This will call for many more acquisitions if it has to enter the elite global league of five or 10 (currently it is ranked at 56th in the world). To raise funds for such a consolidation spree, the Tatas may have to exit lesser core sectors. "In a globalised market, core competence has to be there. I see core competence coming full circle for Indian companies," says S. Mukherji, MD, ICICI Securities.

Hostile Takeovers will Increase

In most core sectors in the country, there are just too many players with bit capacities. What's needed is consolidation, and even mergers of some big players, in sectors like pharma, steel and textiles, to name just three. "Consolidation is inevitable in the Indian marketplace. I expect both friendly and hostile takeovers in the next 10-15 years," says V.N. Dhoot, Chairman, Videocon Industries. Mounting many of those bids will be global giants vying for a piece of the India action. And with private equity and foreign institutional investors owning chunks of equity in Indian majors, promoters will find it difficult to hold on to the reins.

Transformation of the mobile
In 1995, when mobile services were introduced in India, it was a luxury. But today, it has evolved into a necessity, thanks to cost-effectivness

Rural India will be a Significant Contributor to India Inc.'s Revenues

A market of 1.1 billion consumers is how everyone likes to look at India. Few remember that of this number 750 million people live in nearly 6,00,000 villages. The attraction of these markets is about their future potential. According to a recent ac Nielsen study, in 2005, the country's 6 lakh villages accounted for 30 per cent of total FMCG consumption, while the top 35 towns accounted for 29 per cent of consumption. The math for now is clear: The 30 per cent is accounted for by 750 million people, while the 29 per cent is accounted for by the 110 million living in the towns. To grow their revenues, companies will look to bridge this gap in the years to come, creating a win-win situation for all.

How corporate India has evolved since Independence
50 & 60s
Technical Collaborations
As the country started its industrialisation journey, Indian companies entered into technical collaboration to manufacture goods in India.

Joint Ventures Abroad
K.K. Birla Group company was the first to explore international geographies via joint ventures way back in the mid-sixties followed by JVs from Thapars, Tata, Singhania, Mafatlals etc.

Joint Ventures In India
Maruti Suzuki's joint venture in the early 80s accelerated the pace of big JVs in India. Another big one was Hero Honda Motors. A few JVs didn't last too long. Eg: Mahindra-Ford, and Mercedes-Tata.

Overseas Borrowing/ GDR/ADR
As the government allowed companies to raise money via global depository and American depository receipts, big companies like ICICI Bank, HDFC Bank and VSNL got listed on the global bourses.

...THE PICTURE BY 2010...
What's likely in store in the shorter term?
Global professionals will be at the helm of affairs of Indian multinationals
HOW IT WILL PLAY OUT: Jet Airways, MCX and Indian Hotels already have foreign professionals at the top and this trend will only accelerate as Indian companies go global.

Made in India will be a brand to reckon with globally
HOW IT WILL PLAY OUT: Indian companies across sectors-steel, automobiles, textile, beverages, hotels-entering the global market via the inorganic route will create and establish the Made-in-India brand.

India's big business houses will be aggressive players in the retail sector
HOW IT WILL PLAY OUT: The Bhartis, Reliance and the Tatas have already jumped into the retail fray. Those that are said to be coming include the A.V. Birla group, the Hero group and Ranbaxy. A few won't last the long haul.

Telecom service providers will reap the benefits of the transformation of the mobile from being just a phone to a PC
HOW IT WILL PLAY OUT: The mobile will no more be just about making calls and sending text messages-it will be about music, photos, multimedia, surfing, even paying bills. The service operators are the ones who will rake in the benefits.

India Inc as we know it today would have consolidated dramatically domestically
HOW IT WILL PLAY OUT: The Indian market is quite fragmented with small-size players in virtually every sector. In order to achieve world-class scale, there will be a series of big acquisitions (not all of them friendly) involving the top 100 companies in terms of market capitalisation.

Indian BPOs will become global companies
HOW IT WILL PLAY OUT: Indian BPO players are today setting up onshore delivery centres for their clients. As they expand their footprint, this could, in the years to come, transform them into global companies.

Rural India will be a significant contributor to India Inc's revenues
HOW IT WILL PLAY OUT: A market of 1.1 billion people, of which 750 million live in 6 lakh villages. Does India Inc have a choice but to tap this market?

The Mobile will be More than Just a Phone

When mobile services were introduced in India in 1995, it was a luxury. From then, to 11 years later today, the mobile phone has evolved into a necessity. The reason for this, besides increasing players and thus reduced costs, is the fact that the mobile is slowly but surely morphing into a multi-purpose service provider like the internet, which allows you to not only make phone calls and send the traditional text messages, but also send multimedia messages, listen to the radio and music, click photographs, surf the net, make payments, and soon perhaps watch TV. The biggest beneficiaries of this trend will be service providers such as Airtel, Hutch, Idea, and Reliance, who are raking in significant portions of their revenues (35-40 per cent) from value-added services.

Global Powerhouses
Indian BPOs are now waking up to the importance of setting up delivery and work centres closer to their clients' offices across the globe

One-Stop Financial Supermarkets will Emerge

India has large number of small, low-capitalised financial services companies. And as the RBI reviews the M&A guidelines for foreign banks in December 2008, the Indian banking space is set to see big mergers. Citibank already has little over 10 per cent in HDFC Ltd which has stake in HDFC Bank, HDFC Standard Life and HDFC Chubb. Temasek of Singapore, too, has around 7.42 per cent in ICICI Bank where the public holding is far lower than the private equity player. Market observers believe India will have few big large financial conglomerate like SBI, ICICI Bank, HDFC Group along with one or two large merged entities formed via PSU mergers, offering banking, broking, insurance, mutual fund and other advisory services under one roof.




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