India Inc must foray abroad with caution

In February 1912, when the first steel ingot rolled out of Jamshedpur and the first export of steel rails was made to Mesopotamia, the then Tata head made the acerbic comment: “If Sir Fredrick had carried out his undertaking, he would certainly have had some slight indigestion.”

Indian MNC’s are expanding at a rapid pace. They are in a aggressive state of mind to increase their business to overseas market. For this mergers and acquisition is the best strategy. It gives them a new market with established company. They don’t have to spend time in entering the market and make their brand popular.

Tata’s recent bid for CSN is for Rs. 37,858 crore which is double the FDI received in 2005. If this acquisition is consolidated this would become the largest acquisition ever by any Indian company. The next big acquisition in the process is Videocon’s bid for Daewoo Electronics. The outflow is more then the inflow investment.

According to the statistics available (FICCI source) between 2000 and 2006, there were 307 acquisitions totaling over Rs. 90,000 crore. Another interesting thing about the Indian company’s acquisition is that they are expanding in well established markets like Europe and U.S. When we compared it with China, China is focusing on least developed market like Africa. The reason behind is that China is fulfilling its demand for commodities such as oil, metals and farm goods to give a boost to China’s surging economic growth.

India has to be careful as the foreign players are watching the activity of Indian corporate. India has to be ready for hostile bid and takeovers by the foreign players as Indian companies are equally attractive for foreign companies. The FII investment in companies like HDFC, Satyam and ICICI is quite significant. It is time for the Indian companies to be careful and ready to for any offer of acquisition.

SOurce: THis article is the analysis of the article by BY T.C. A. Ramanujam which came in Business Line