By Amaar Naraen, Staff Correspondent     

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It is evident that Indian MNCs are keen on M&A (mergers and acquisitions) worldwide; that they are adopting an acquisition led growth strategy, coupled with a strong foothold in the domestic market. Indian firms bought up about 75 firms abroad, in 2003. Thereafter, Indian Corporates are looking to Europe, Asia and South America in terms of acquisition prospects.

Sectors being eyed by Indian MNCs are: Pharmaceuticals, Information Technology, Chemicals, Light Engineering and Entertainment. In 2003, there were 75 cross border mergers and acquisitions by Indian firms, compared to 36 M&A in 2002. This trend continues. In the UK alone, Indian companies have close to 450 investments and JVs, mostly technology centric. India ranks as the eighth largest investing country in the United Kingdom.

Currently, about 1,441 Indian companies are operating in Singapore. In the US, the top 92 Indian-American owned companies totted up business worth US$2.2 billion. They provided fulltime employment to 19,000 people. Between 2001 and 2003, Indian MNCs have taken over 120 foreign firms, with net worth of about US$1.6 billion. Seven Indian companies are on the NYSE, with three on the NASDAQ. Fifteen Indian Multi National Companies are listed on the London Stock Exchange.

In January 2004, the Indian government removed the ceiling of US$100 million on foreign investment by Indian companies and raised it to their net worth. More than 75 Indian businesses are expanding globally, bringing them closer to the definition of a true MNC. According to reliable sources an Indian MNC index is in the making, which will reflect the actual extent to which Indian companies have globalised.

A clear shift in the mind-set of the Indian firms is evident; they appear to have realised the value of the competitiveness, globalisation could afford them. Little wonder then that many Indian giants are on an acquisition spree abroad. These days, Indian firms are focusing on productivity and profitability. The blue chips are cash rich, thanks to the financial reforms in India, as well as a strong rupee.

As a sample of the confidence Indian entrepreneurs have acquired, consider S K Munjal’s (MD, Hero Corporate Services) statement that his company already exports to 90 countries and that they are planning to set up another unit to extend their global reach. The Aditya Birla Group, Ranbaxy and the TVS group are also highly visible examples of Indian companies successfully operating worldwide. Many Indian MNCs have clearly opted for an acquisition led strategy together with a strong foothold in the domestic market and exports.

At the Indian Economic Summit, organized by the World Economic Forum and the Confederation of Indian Industry, a session titled ‘Going Global: Indian MNCs Abroad’, distinguished personalities such as Davindar S Brar, CEO and MD, Ranbaxy Laboratories, and Vernon J Ellis, International Chairman, Accenture, discussed the issues: Should Indian companies globalize? Should they focus on emerging or developed markets? Should they adopt a sectoral global growth strategy? Should the definition of Indian MNCs be stretched to include companies being managed by the Indian Diaspora, abroad?

The extensive debate threw up some substantive answers to the above queries. Mr. Shah, from the Ministry of Commerce, India, argued that Indian companies should adopt an aggressive attitude towards breaking into foreign markets.

Mr. Ellis spoke of Tata Indica being sold in the UK under the brand of Rover and the progress of Indian companies delivering true cross border services. He pointed out that innovative ideas tend to flourish in international markets and on this front the Indian companies’ inexperience in global markets could in fact be an advantage.

Mr. Brar insisted on the necessity of Indian firms going global. He put forward the view that, first, Indian firms must leverage success in the domestic markets, second, access multiple foreign markets, and third, they must build up a multinational skill set.

Mr. Seaman, Group Executive VP, International, NYSE, USA, outlined four reasons why Indian MNCs should consider complete listing on the New York Stock Exchange (NYSE) as a global growth strategy: First, the strategic benefits that come with a listing in the NYSE; second, leveraging the advantages of privatisation; third, the development of the domestic market and forth, the increased attractiveness of the country of origin. He also stressed the need for a sound financial strategy when operating globally.

India Inc on their minds

Professors at leading B Schools – Wharton, Sloan, Michigan, Harvard – are giving Indian economy and business, a closer look. And for good reasons. Prof. C K Prahlad of Michigan Business School: “Five years from now people from around the world will come and benchmark India.” Prahlad is not alone in being upbeat on India. “India’s hot,” admits Patrick Harker, Dean, Wharton School.

By the mid-90s, India’s capability of delivering world class products in a global market were proven by IT companies such as Infosys and Wipro. Since then, Indian MNCs’ performance has gathered momentum and mass.

India, apparently, has capitalized on its knowledge-rich human resources, especially in the IT sector. There are hardly any large Business Schools that have not had Wipro or TCS coming and talking to them. Students are rightly asking, “If these companies are growing at 40 percent, why are we not joining them?” Robert M Conroy, Darden Graduate School of Business, points out: “India has emerged as an important challenge and an opportunity for all managers.” Thus, from being a small fish in the global pond, India has metamorphosed into a sizeable predator.

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