A Too-Late Tale Of Ambitious Indian Firms

Battered stocks, falling profits and ratings downgrades are hardly the characteristics of a powerhouse, let alone a global powerhouse.

Despite the current crisis however, Indian companies profiled in Nirmalya Kumar's new book, India's Global Powerhouses (Harvard Business Press, $27.95), will transform business and change the way the developed world sees India, the author predicts.

Set for release on 2 April, the 256-page book is a ready reckoner of some Indian companies that have made large overseas acquisitions in recent years, or are otherwise affecting the global marketplace and forcing Western firms to take note.

Indian companies, once content with being the big fish in their home markets, have gone from being low-price bidders for mostly distressed assets to being savvy investors in strategic foreign assets they are not afraid to fight for, Kumar says.

The author, a professor of marketing and co-director of the Aditya Birla Centre at London Business School, profiles a handful of well-known firms such as Infosys, Mahindra & Mahindra and the Tata Group, as well as more recent claimants to the title of global powerhouse, such as Hindalco, Suzlon and Marico.

There is a roll call of recent big-ticket acquisitions, including Tata Steel's $12-billion acquisition of Anglo-Dutch Corus, Hindalco's $6-billion purchase of Canada's Novelis and Tata Motors' $2.3-billion buy of Jaguar and Land Rover from Ford.

As with any list, there are omissions, including Indian drugmakers, who are expected to change the generics landscape, and the Reliance groups, giants in the local market.

There is useful historical context, including religion and culture, of the pre-liberalisation era, the protectionist "License Raj", and the reforms of 1991 that led to rapid economic growth, increased competition and forced firms to shape up.

Based on interviews with founders and senior management, Kumar, along with his collaborators in India, Pradipta Mohapatra and Suj Chandrasekhar, offers insight in a textbook format: while every big multinational has rushed in, he notes, India can safely be regarded as the "joint venture graveyard of the world".

But like a crime whodunit with the good stuff at the end, the most important insights, given that events have clearly overtaken the book, come at the end, where Kumar looks at challenges for Indian firms that even a year ago seemed invincible.

These include bureaucratic apathy that means it can take 225 days to get a building permit; infrastructure constraints including acute power shortages and a slow legal system; a need for innovation and a potentially crippling talent crunch.

More tellingly, Kumar also cautions about the need to match ambition with capability in cross-border acquisitions; deals fuelled by easy liquidity can load a company with too much debt or dilute shareholders' equity, he warns.

For a cautionary tale, consider Tata Motors, inventor of the Nano, the world's cheapest car, and buyer of the Jaguar and Land Rover luxury brands, now struggling with a $2 billion bridge loan and facing more ratings downgrades.

Still, the era of India as a major investor is here. "There was a time when Westerners assumed that an Indian in the head office of a multinational or Western company was either an accountant or a computer nerd. Nowadays, that person is just as likely to be the boss," Kumar says.

(Reuters)