In September 2006, Tata Steel was a 99-year-old company which annually produced five million tonne of steel and was ranked 56th in the world amongst steel producers. By mid-October, it had acquired Corus, which produced 18 million tonne of steel and Tatas jumped from No. 56 to No. 5. The Tata-Corus deal is the single largest cross-border acquisition by an Indian company and exemplifies the new global ambition of Indian business. I think one can appreciate the size of this deal when it is translated into
Our December 2003 cover
Rs 37,858 crore, nearly twice what the Centre will spend on roads and bridges this year. As of now, after this transaction, India has emerged as a net exporter of capital.
In the past five years, 307 overseas companies have been acquired by Indian corporates, the worth of the mergers totalling $20 billion (over Rs 90,000 crore). The rate of Indian acquisitions has been growing exponentially over the past five years, the last two witnessing more than half of the 307 takeovers. The acquisitions reflect the growing confidence of Indian businesses because they believe they can do a better job than the foreign players. It also indicates the cash surpluses accumulated by companies in an economy consistently growing at 8 per cent. Indian businesses have emerged from fairly retrogressive economic conditions to embrace the global markets so much so that our business section calls these Indians the Raiders of the Lost Ark.
The open economy of the past 15 years has forced Indian companies to become globally competitive. They have realised there is no reason why they should confine themselves to the domestic market. For many, the only way to go is global. The smartest of firms know that building assets in India takes far too long and comes with too many strings attached and therefore have begun to shop abroad.
The story of the Indian software companies’ overseas thrust is well known but the international forays of companies in the manufacturing sector are relatively new. The audacity and aggression is truly breathtaking. Bharat Forge is the second largest forging company in the world, Ranbaxy is among the top eight generic drug manufacturers in the world. Asian Paints is one of the top five paint companies in the world. Wipro is the world’s largest third party engineering services company.
We have been tracking this phenomenon for the past three years, doing seven stories on Indian companies acquiring overseas businesses. Managing Editor Shankkar Aiyar, who has covered business since the beginning of liberalisation, put together this week’s cover story and he says, “My first story was about India pledging its gold reserves to the Bank of England for $405 million. The Tata deal is 20 times that amount.”
Need I say more?