HEC Eurasia Institute

HEC Eurasia Institute
© HEC Eurasia Institute
HEC Eurasia Institute
INDIAN FIRMS GO GLOBAL
CONTENTS
Page
Introduction - From “Shining India” to “Global India Inc.” ………………………… 5
PART 1 – THE RISE OF NEW GLOBAL PLAYERS …………………………………………..7
1.1
The specificities of Indian corporate landscape
1.2
What make them tick?
PART 2 – INDIAN PLAYERS ARE EYING OVERSEAS ………………………………………11
2.1.
Indian overseas investments are skyrocketing.
2.2.
What make Indian firms eye overseas?
2.3.
Where do they go?
PART 3 - GOING GLOBAL: WHY AND HOW? ……………………………………………...23
3.1
The global stage: a new frontier for Indian firms.
3.2
Indian strategies for international expansion.
3.3
The funding of internationalization.
3.4
What success for Indian firms overseas?
PART 4 – WHERE DO INDIAN FIRMS INVEST? ..............................................................53
© HEC Eurasia Institute
4.1
Indian companies’ first step abroad: the developing countries.
4.2
Developed countries: the ultimate targets.
Appendix – 10 successful Indian companies …………………………….…………67
INDIAN ENTERPRISES MENTIONED IN THE SURVEY
© HEC Eurasia Institute
Aban Offshore Ltd (AOL)
Oil: offshore drilling
services
Mahindra & Mahindra
Aditya Birla Group
Conglomerate
Mahindra Sar Transmission Pvt.
Automotive
Ltd.
Arcelor Mittal
Steel
Mahindra Systems and
Automotive Technologies
(MSAT)
Automotive
Ashok Leyland
Automotive
Mittal Steel
Steel
Asian Paints
Painting products
Moser Baer India Ltd.
IT and consumer
electronics
Avesthagen
Pharmaceutical
National Aluminum Corporation
Aluminium
(Nalco)
Bajaj Auto Ltd.
Automotive
National Mineral Development
Corporation (NMDC)
Bank of Baroda
Bank
Nicholas Piramal India Ltd.
Pharmaceutical
Bharat Forge Ltd.
Steel
National Thermal Power
Corporation (NTPC)
Power generating
Bharat Petroleum Corporation
Oil
Oil and Natural Gas Corporation
Oil
Ltd (ONGC)
Bharti Airtel Ltd.
Cadila Pharmaceuticals
Cipla Ltd.
Coal India Ltd (CIL)
Telecom
Pharmaceutical
Pharmaceutical
Coal
ONGC Videsh Ltd (OVL)
Petronet LNG Ltd.
Precision Group
Prize Petroleum Company Ltd.
Oil
Energy
IT
Oil
Coal Ventures International Ltd
(CVIL)
Coal
Ranbaxy Laboratories Ltd.
Pharmaceutical
Crompton Greaves Ltd.
Electrical components
Steel
Dr Reddy Pharmaceutical
Essar Global
Essar Steel Ltd.
Gas Authority of India (GAIL)
Pharmaceutical
Conglomerate
Steel
Gas
Rashtriya Ispat Nigam Ltd
(RINL)
Reliance Globalcom
Reliance Industries Ltd.
Satyam Computer Services Ltd.
Singhania Exports Pvt. Ltd.
Gujarat Apollo Industries
Road construction
equipment
State Bank of India
Bank
HCL Technologies
IT
Steel Authority of India (SAIL)
Steel
Hindalco Industries Ltd.
Aluminium
Subex System Ltd.
IT
Hindustan Motors
Automotive
Sun Pharmaceutical Industries
Pharmaceutical
Hindustan Petroleum
Corporation Ltd.
Oil
Suzlon Energy
Wind energy
ICICI Bank
Bank
IT
Indian Oil Corporation (IOCL)
Oil
Tata Consultancy Services
(TCS)
Tata Motors
Indian Overseas Bank
Infosys Technologies
Jet Airways
Jindal Steel and Power (JSPL)
Jubilant Organosys
Kalyani Group
Kirloskar Group
KPIT Cummins Infosystems
Ltd.
Lupin Ltd.
Bank
IT
Airline
Steel
Pharmaceutical
Conglomerate
Conglomerate
Tata Steel
Tata Tea
United Breweries
United Phosphorus Ltd.
Vedanta Resources
Videocon Industries Ltd.
VIP Industries
Steel
Beverage
Beverage
Chemical
Mining
Consumer durables
Luggage
IT
Walchand Infotech
IT
Pharmaceutical
Wipro
IT
Mafatlal Industries Ltd.
Textile
Wockhardt
Pharmaceutical
Automotive
HEC Eurasia Institute
Telecom
Conglomerate
IT
Textile
Automotive
HEC Eurasia Institute
INTRODUCTION
From “Shining India” to “Global India Inc.”
Over the last decade, India has become one of the most brilliant emerging economies. Its GDP has grown
from US$350 billion in 1990 to US$1,089 billion in 2007, one of the top15 richest countries in the world. Its
GDP per capita has reached US$1,000 in 2007, from US$390 in 1990. After thirty years of a so-called
“Hindu rate of growth”, close to 2.2% from 1970 to 1990, GDP growth jumped to between 8 and 9% in the
last few years. “Shining India” is now on the front-page of international newspapers and willing to show its
new power.
Yet, India remains a land of paradoxes and diversity, caught between high growth and modernity in certain
sectors and a poor farmland where masses still lag behind decent economic levels. Even if poverty has
diminished, it still represents a significant part in the Indian society: 40% of Indians are illiterate; 40% live
below the absolute poverty line (less than 1 US$ a day, by World Bank standards). Infrastructures (roads,
seaports, airports) remain depressingly obsolete, although large construction projects for roads and
additional airports have recently been given the go ahead. The challenge concerning energy supply is of a
similar kind: the forecast for oil consumption over the next five years is a rise of almost 5% a year, from 2.6
million barrels/day at present to 3.3 million barrels/day in 2011.
On the other hand, a new class of 50 million consumers has emerged. 250 million Indians now possess a
mobile phone, and the number is about to reach 500 million in 2010. A large number of Indian
entrepreneurs are now listed among the world’s wealthiest people (Lakshmi Mittal, Mukesh and Aril
Ambani, K.P. Singh, Ratan Tata etc.). Internet flourishes to take over from inefficient or inexistent roads:
Internet sockets outnumber water taps, some say! The service (55% of GDP) and industry (28% of GDP)
sectors play a significant role in India’s emergence, with an average growth around 10% per year. Indian
companies excel in key industries such as information technology (IT) and related services (ITES), financial
services, light manufacturing and automobiles, and pharmaceuticals.
After forty years of a rigid State control on the economy and companies, with borders being closed to
foreign trade, heavy bureaucracy and corporate activity being subject to intricate authorizations of all kinds
known as “License Raj”, the liberalization of India’s economy at the beginning of 1990’s gave a breathing
space for foreign business and investment. Indian Foreign Direct Investments reached US$30 billion in
2007, from US$100million in 1990; FDI inflows reached US$25 billion in FY2007 (April 2007 to March
2008).
© HEC Eurasia Institute
India’s emerging companies are now willing to take a significant global stake. Boosted by their amazing
domestic growth and self-confidence, they are eager to take a piece of the cake. Pharmaceutical, IT, auto
components, hotel business, energy companies etc. rush out of their comfort borders to compete with
traditional Western leaders. The globalization process of India has just begun. Indian firms are going on an
overseas shopping spree to extend their client base, enhance their value chain, and secure the country’s
natural resources supply. Some of them already have their hands on Western florets such as Jaguar and
Land Rover, the colour picture tube (CPT) division of Thomson, and the steel producer Corus.
Who are they and what make them tick? Do we know the many others to come, either as competitors or
partners? Why are they looking abroad? How are they competing with traditional global players? Is India
Inc. about to shine on the world? This interesting survey tries to answer these questions.■
HEC Eurasia Institute
Executive Summary
Survey
“Indian Firms Go Global”
September 2008
Since 2007, Indian companies have invested abroad more than they have received from abroad. Indian
investments have doubled in the last two years, and reached the amount of 30 Bn. USD in 2007.
However India is still a small “FDI player” on the international stage: India’s part in the world’s FDI
stocks represents only 0.1%.
•
India’s business landscape is mainly composed of family-owned conglomerates (e.g. Birla,
Mittal, Tata etc.), new entrants (since the late 1980’s) from the private sector (e.g. Videocon, Wipro
etc.), and state-owned companies, especially in the energy (e.g. ONGC Videsh) and finance sectors
(e.g. Bank of India).
•
These companies benefited from the political and economic situations in India, such
as the economic liberalization – with the end of the « licence Raj » policy - and the promising
economic indicators of a robust economy and a strong currency that endured at least until 2008.
•
On the international stage, Indian emerging companies are looking to find new
markets abroad, to develop and buy new assets and skills, and are searching for raw material and
energy supplies missing in India.
•
The Mergers and Acquisitions (M&A) activity takes the biggest share in total
outbound investments: in the last two years, more than 40 Bn. USD has been spent on crossborder M&A by Indian firms. Such transactions are certainly risky, but enable these firms to have a
rapid access - and at best cost - to new opportunities and assets. These firms also benefit from
a large range of competitive advantages: in India, a huge amount of liquid assets and more flexible
measures for authorizing overseas investments; and abroad, lower and more attractive interest
rates.
•
Only a handful of sectors are targeted by India’s emerging multinationals (IT services,
automobile ancillaries, pharmaceuticals). Many other companies in various business sectors (e.g.
banking, the hotel industry) will soon follow.
•
Indian enterprises are interested in developing countries as they are easier to access, as
well as the more established and mature markets of developed countries.
Indian companies still have a long way to go before becoming real competitors or great partners for
Western multinationals. Until now, these enterprises have been rather inconspicuous. For instance,
there are only seven Indian companies listed in the 2008 edition of the Fortune 500 ranking – versus
29 Chinese companies – most of which are state-owned. However, some Indian firms are already
listed among the top 10 in the world in sectors such as energy, generic drugs, IT, and automobile
ancillaries. Their ambition is to be among the world’s top 5 before 2012. ■
HEC Eurasia Institute
Résumé
Etude
“Indian Firms Go Global”
Septembre 2008
Depuis 2007, les Indiens investissent plus à l’étranger qu’ils ne reçoivent de l’extérieur. Les
investissements indiens à l’étranger ont doublé au cours des deux dernières années pour atteindre près
de 30 Md. USD en 2007. Mais avec 0,1% du stock mondial d’IDE, l’Inde reste encore un petit joueur à
l’échelle internationale.
•
Un paysage dominé par les grands conglomérats familiaux (Birla, Mittal, Tata etc.), les
nouveaux entrants (depuis la fin des années 1980) issus du secteur privé (Videocon, Wipro
etc.), et les grands entreprises d’Etat, surtout présentes dans le domaine de l’énergie (ONGC
Videsh) ou de la banque (Bank of India).
•
Elles ont bénéficié de conditions politiques et économiques favorables sur leur
marché domestique, à commencer par la libéralisation économique - avec notamment la fin du
« licence Raj » -, d’indicateurs économiques au beau fixe (une économie vigoureuse, une roupie
forte), au moins jusqu’à 2008).
•
A l’international, les multinationales émergentes indiennes cherchent à accéder à de
nouveaux marchés, à créer ou acquérir de nouveaux actifs et de nouvelles compétences, et à
trouver ces matières premières et énergétiques qui font tant défaut à l’économie indienne.
•
Les fusions et acquisitions (M&A) réalisées par les groupes indiens se taillent la part
du lion des investissements indiens : plus de 40 Md. USD ont été dépensés en M&A à l’étranger
au cours des deux dernières années. Ces opérations sont certes plus risquées, mais leur permettent
d’accéder rapidement et au meilleur coût à de nouveaux horizons et de nouveaux actifs. Elles tirent
aussi parti de conditions favorables : du côté indien, d’immenses liquidités accumulées et
l’assouplissement des mesures pour la sortie des capitaux ; du côté de l’étranger, des taux
d’investissements plus bas et attractifs.
•
Seule une poignée de secteurs sont concernés par l’arrivée des nouveaux
concurrents indiens (les technologies de l’information et de la communication, les composants
automobiles, les produits pharmaceutiques). De nombreuses autres entreprises issues de multiples
secteurs (banque, hôtellerie) sont dans les starting blocks.
•
Les entreprises indiennes s’intéressent aussi bien aux pays en développement, réputés
plus faciles d’accès, qu’aux marchés établis et matures des pays développés.
Les entreprises indiennes ont encore un long chemin à parcourir avant de devenir réellement de vrais
concurrents ou de grands partenaires pour les multinationales occidentales. Jusqu’à présent, ces
entreprises sont plutôt passées inaperçues. A titre d’exemple, Fortune 500 ne répertorie en 2008 que 7
entreprises indiennes (contre 29 chinoises) – dont la plupart du secteur public. Pourtant, dans
certains secteurs d’activité comme l’énergie, les médicaments génériques, les technologies de
l’information, les composants automobiles, certaines multinationales indiennes s’inscrivent d’ores et
déjà dans le top 10 des leaders mondiaux de leur secteur. Et leur ambition ne s’arrêtera pas là : elles se
voient bien intégrer le top 5 d’ici à 2012... ■