Indian Companies Going Global
 
Early on July 1, the Pierre Hotel in New York added a unique accessory to its façade: the Indian flag, marking the acquisition of a luxury hotel by an Indian company funded by Indian capital. The hotel acquisition is by no means a one-off transaction, but depicts India’s nimble steps toward acquiring a piece of the world economy.

Despite the current and emerging funding sources, several companies have internally generated resources to finance acquisitions. The drive toward cross-border M&A by Indian companies is to augment growth in market share, scale, size, profitability and lastly global competitiveness. This inorganic growth strategy is being employed by companies of all sizes and across multiple sectors.

India’s purchases albeit small vis-à-vis China’s state-owned enterprises and other industrialized country members, Indian company strategies are being deployed by entrepreneurial type entities. These acquisitions coupled with the post transaction economies of scale that Indian talent and cost structures could generate, suggests a framework for new standards for global companies to follow even in mature sectors such as, generic drugs, clinical research, IT services, etc.

This inorganic growth strategy, in part, could be accelerated by the multitude of India centric private equity. With foreign exchange reserves of ~$150 billion, the government has been enabled to lift restrictions allowing more freedom. The prevailing low interest rates, robust economic growth; solid corporate profits and high market capitalizations - all serve as the drivers and supporting infrastructure for domestic companies to pursue the creation of “home grown” multi-national companies. While pursuing their acquisition binge, Indian companies are demonstrating their desire to become global well before reaching a global scale. Indian acquisition strategies are not always to capitalize on the low cost advantage of exporting execution to India but also to improve post acquisition margins by exporting their learnt talent of doing things “right” on foreign soil and for foreign companies. This is clearly attributable to the world-class managerial capabilities.

As the world further recognizes the value of skilled Indians for their process and service capabilities, so too, the increasing number of Indian owners of business entities in foreign lands will bring more recognition for Indian entrepreneurship. The recent success, tenacity and perseverance demonstrated by Mittal in his acquisition of Accelor, the Belgian Steel enterprise, Indian business owners will also gain the requisite confidence to continue acquisitions cross border perhaps with more vigor and larger transactions. This could well be the first step toward India's emergence as the leader in services, operations and the creation of domestic bred multi-national companies.