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THE RUPEE'S RISING CLOUT

Tata Motors' pending purchase of Land Rover and Jaguar is only the latest example of an Indian outfit flexing its muscle abroad. A stronger currency is seen as a buying opportunity

reportonbusiness.com: THE RUPEE'S RISING CLOUT


BRIAN MILNER
March 26, 2008

Nothing illustrates India's rise as a global economic power better than the planned acquisition of two of Britain's most prestigious auto brands by Tata Motors Ltd., part of India's biggest conglomerate.

The deal for the Jaguar and Land Rover brands now owned by Ford Motor Co. may be announced as soon as today. The price tag of more than $2-billion (U.S.) is a relative bargain.

Ford, which has been searching for a buyer for the British luxury car units for nearly a year, paid $2.7-billion for profitable Land Rover alone in 2000. Money-losing Jaguar cost Ford $2.5-billion when it was acquired in 1989.

Tata Motors is just one of numerous Indian companies in sectors ranging from heavy industry, oil and chemicals to information technology, wind power and beverages that are taking advantage of a booming domestic market and a considerably stronger currency to flex their muscles abroad.

While Canadian manufacturers complain that a strong dollar is hurting exports, Indian companies view the rising rupee as a buying opportunity.

In the process, they are snapping up strategic businesses and iconic brands in Britain and other developed countries, reversing the traditional pattern whereby rich countries controlled the flow of capital and did most of the acquiring.

Here was a colony of Britain whose people were treated as second-class members of the empire, said William Nobrega, president of Conrad Group, a Miami-based strategic planning firm that specializes in Indian and Brazilian business. "And now they're out there buying British brands.

"Winston Churchill must be turning over in his grave."

The acquisition of Jaguar and Rover is "wonderful, poetic justice," he added. "Things have come full circle."

Tata Group has not been snapping up foreign companies out of a desire to put Indian business on the global map or to make a nationalist point, chairman Ratan Tata told The Globe and Mail in a recent interview.

Instead, it has been trying to forge advantageous partnerships in its various businesses, as well as hedge against the risk of having too many eggs in the Indian basket.

"What we are looking for is not just scale but strategic growth, filling a product or geographic or technological gap," Mr. Tata said.

The company began expanding overseas when Tata Motors, its auto-making arm, was hit by a sharp downturn in the Indian market in the late 1990s.

"That led me to ponder whether we should ever leave ourselves open to be dependent on one economic cycle, or whether we should expand ourselves beyond the shores of India," he said.

At the time, Tata set a goal of obtaining 30 per cent of its revenue from overseas operations. Today, thanks to its $11.3-billion acquisition of Anglo-Dutch steel giant Corus Group PLC, 60 per cent of group revenue comes from abroad.

"Indian companies clearly are much more confident on the world stage," Mr. Nobrega said. "In a very short period of time, 10 or 15 years, they've set out to create global brands in what would traditionally take decades."

But few command the resources of Tata, whose vast interests run the gamut from autos, steel, chemicals and power to communications, retailing, hotels, satellite TV and tea. Indeed, the company's first major foreign acquisition was the British stalwart Tetley Tea in 2000.

"It showed the ability of Tata to make bold acquisitions overseas," said Aaron Chaze, author of a book called India: An Investor's Guide to the Next Economic Superpower.

At the time, it wasn't easy for even a major Indian company to obtain the financing for such big-money purchases. Today, banks are lined up at Tata's door to lend all the capital needed for the deal with Ford.

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2008

Tata Motors Ltd. buying Ford's Jaguar and Land Rover brands for more than $2-billion (U.S.).

2007

United Breweries Ltd. buys Glasgow-based Scotch maker Whyte & Mackay for $1.2-billion.

2000

Tata Tea makes conglomerate's first big British foray, buying Tetley Tea for $540-million.

2008

Tata Chemicals Ltd. buys U.S. soda-ash producer General Chemicals Industrial Products for $1-billion.

2007

Aluminum manufacturer Hindalco Industries Ltd. buys Atlanta-based Novelis Inc. for $3.3-billion.

2007

Wipro Technologies forks out close to $600-million for Infocrossing, a New Jersey technology company.

2008

Siva Ventures Ltd. picks up JB Ugland Shipping of Norway for $302-million.

2007

Tata Steel Ltd. acquires Anglo-Dutch steel giant Corus Group for $11.3-billion.

2007

Suzlon Energy acquires Repower Systems of Germany for $1.8-billion.

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__________________
Hasta la Victoria siempre!

Adux

Atleast we are the true globalizers, we are investing abroad and providing jobs there too. Now if we can only bring all the MNC's invested in China to India. ..

Zeng

Shouting here on WAB wouldn’t get your country FDI (Foreign Direct Investment).

But I can give some good news to you. Because China issued new Labor Law and started new Environmental Law Initiative, around 30% foreign companies in China are thinking about leaving China because increased operation costs.

You better do your work well to compete with Vietnam, Philippine, Pakistan and other countries for their moving to your country.

Chinese Labor Law Reform: Guaranteeing Worker Rights in the Age of Globalism - Worldpress.org

New labor regulations designed to protect China's workers are already having an impact, according to an American-based watchdog
Is China’s Labor Law Working? | Newsweek International | Newsweek.com

EPA - China Environmental Law Initiative Home | US EPA

Many people here on the WAB accuse China and other developing countries operating Sweatshops. But when China issued new Labor Laws to protect Chinese workers, those foreign companies complain and threaten to leave.

Good for China this time and let them leave if they want.

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I am here for exchanging opinions.

Adux

We get nearly 30-45 billion dollars year in FDI from non-indian origin players.