The global Indian takeover

Ladies and gentlemen please take your seats. You are about to witness one of the greatest shows on earth: the gradual Indian takeover of global companies.

As the process unfolds, every worthwhile Indian company will become a multinational corporation (MNC) that not only starts businesses abroad but also swallows up existing foreign multinationals.

When India began globalising in 1991, the Indian left howled that this would mean the wholesale takeover of Indian companies by foreign multinational companies (MNCs).

When liberalisers like me suggested that globalisation would equally mean the takeover of foreign companies by Indian multinationals, we were viewed with amusement as some sort of creatures from outer space.

So entrenched was the notion of Indian inferiority and foreign superiority that the very thought of Indian companies taking over global ones was regarded as science fiction.

Today, it has become a reality . The trend began haltingly a few years ago. In 2000, Tata Tea took over a global company twice its size, Tetley Tea, the second biggest tea company in the world. This was a leveraged buyout.

That is, global financiers provided the funds to enable an Indian minnow to take over a global whale. Far from being a force of neo-colonialism, global finance is now helping smaller Indian companies to acquire much larger global ones.

Next, Essel Packaging , owned by Subhash Chandra, took over Propack of Switzerland to form Essel Propack. The merger created the biggest producer in the world of laminated tubes, and an Indian MNC became global number one.

But these takeovers remained exceptional events till 2003. Only in that year did the pace of Indian takeovers accelerate so much as to constitute a new trend, one that the world must sit up and take notice of.

According to one source, more than 40 foreign companies were taken over by Indians last year. Just consider the main examples:

Tata Motors is all set to acquire the truck factories of Daewoo in South Korea for a reported $118 million.

The Ambanis have bid for, and look very likely to takeover, Flag International, a major international telecom network, for perhaps $211 million.

Ranbaxy, our biggest pharmaceutical company, has just acquired RPG Aventis , the French generic wing of the multinational Aventis. Here again, an Indian minnow has acquired part of a global whale.

Wockhardt, owned by the Khorakiwalas, acquired CP Pharmaceuticals of UK. The Khorakiwalas had already made a minor foreign acquisition, of Wallis Laboratories, in 1998.

Hindalco, the flagship company of the Kumar Birla group, acquired two copper mines in Australia — Mount Gordon and Nifty.

Sterlite, the successful bidder for the privatisation of Bharat Aluminium and Hindustan Zinc, has become a true multinational by acquiring copper mines in Australia. It has also been short-listed as the preferred bidder for buying a 51 per cent stake in Konkola Copper Mines, the biggest government-owned mine in Zambia.

Readers might think that only the biggest Indian companies can get into the global takeover game. This is simply not so. Many middle-sized companies, which readers may not even have heard of, are becoming multinationals through foreign acquisitions.

Sundaram Fasteners, whose production-line includes humble items like radiator caps, nuts and bolts, has acquired Dana Spicer Europe, the British arm of a global multinational. Separately, Sundaram Fasteners is setting up a plant in China to take on the mighty Chinese.

Amtek Auto, another auto ancillary that came up in the 1990s, has just acquired the GWK group in the UK, which is twice its size. Indian auto ancillary companies are sweeping world export markets and in the process acquiring MNC rivals that cannot compete.

After 30 years of supplying components to UK-based SPP Pumps, Kirloskar Brothers has now acquired a majority stake in the British company. Truly, this is a case of the empire striking back.

I do not wish to bore readers by converting this column into a long, seemingly endless list. Yet, the lengthy and seemingly endless nature of our global takeovers cry out for attention.

In this column, I have listed only Indian takeovers of foreign companies, not the many new factories that Indian companies are putting up overseas.

Again, I have left out of my list a large number of foreign software and BPO companies that are regularly being acquired by top Indian companies. I have concentrated on manufacturing, where Indians are supposed to be least competitive.

The left is correct in saying that globalisation implies the takeover of Indian companies by MNCs, but wrong in implying that takeovers are a one-way street.

The global system is no longer rigged by and for white men. It can be used by Indians no less than Americans to leverage their talent to create global corporate empires. The process has begun.

What do you think?