India Inc. goes shopping

BS OPINION

It has also been true for the larger pharamaceutical firms, with Ranbaxy exporting to 70 countries and setting up manufacturing facilities in seven. This trend has now broadened to include new sectors.

The list of Indian companies setting up manufacturing facilities in China increases almost every week. But it's not only the lure of the huge Chinese market, or its low-cost manufacturing ability, that is driving Indian producers abroad. The reasons for the global expansion are many.

One is the simple one of servicing global customers "" this is true for a company like Essel Propack, and will increasingly be true for the auto ancillary makers. Another important reason has been the need to source raw materials "" companies such as Hindalco and Sterlite have acquired mines in Australia because control over raw material resources is critical for their operations.

The same goes for Grasim's acquiring a pulp mill in Canada and Tata Tea's operations in Sri Lanka. There are other synergies that Indian companies want to exploit "" one example is Tata Steel setting up a ferro chrome plant in South Africa, where the ore will be shipped from the company's chrome mines in India to take advantage of the lower power costs in South Africa.

And the Reliance group, focused exclusively on the Indian market so far, has not only acquired FLAG but is prospecting for oil and gas in foreign oilfields.

In the textile industry, getting around quotas is one objective of setting up a unit abroad "" Arvind Mills, for instance, is setting up a unit in Mauritius. Getting a foothold in larger markets is also an objective "" consider M&M's scouting for a facility in East Europe to get an entry into Euroland.

Eastern Europe, with its low costs, can be an attractive sourcing point for West European markets. In the hotel business, Indian Hotels' search for international management contracts is with a view to showcase its ability to manage the business.

Indian banks are expanding to service the Indian diaspora "" State Bank of India plans to significantly increase the number of its foreign offices. Even a public sector unit such as ONGC has spread its wings abroad, through ONGC Videsh. And Indian cement companies have set up grinding units in Sri Lanka. And this list is by no means exhaustive.

To be sure, some Indian businesses had gone global earlier too. Examples include the Oberois and Aditya Birla's South-East Asian operations. If NRIs are included, Lakshmi Mittal's steel empire and even the Hindujas would be in the list.

Yet the point is that, more than a decade after liberalisation, more and more Indian businesses, earlier confined to India's protected markets, are expanding globally. True, there are pitfalls in the process ""Tata Tea's Tetley acquisition is yet to prove itself.

But these are minor blemishes in the broader picture, which certainly looks good. More importantly, it is a measure of the confidence of India Inc. that it is going beyond competing with multinationals on home turf, and has seized the opportunity to take the battle abroad.