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Desi MNCs conquer the global market
By agencies
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Monday, 05 December 2005, 20:30 IST
NEW DELHI: Twenty of IndiaÂ’s top 100 companies; ranked by market capitalization, generate 50 percent of their revenues from international sales, a paper said.
In other words, they earn more dollars than rupees for the goods and services they produce. When was the last time someone said Indian companies are scared of foreign competition?
By now, you probably know that the IT and pharma biggies make for top dollar earners. ThatÂ’s good news, and old news as well, the Economic Times said.
The new twist in the tale comes from the likes of United Phosphorous, Bharat Forge, Nalco, Tata Tea and East India Hotels. Dollar earnings generate more than half their consolidated topline.
Brick and mortar companies from such diverse sectors as steel, textiles, auto components, petrochemicals and aluminum are foraying into foreign shores like never before. JSW SteelÂ’s overseas revenues account for 49 percent of its topline.
For Sesa Goa, itÂ’s 45 percent, 41 percent for Arvind Mills, 36 percent for Reliance Industries, 34 percent for Cummins India, and 24 percent for Hindalco. For the record, 60 of the top 100 Indian companies earn at least 10 percent of their revenues from global sales.
So, whatÂ’s pushing Indian companies abroad? In a way, the first foreign foray started when the Indian economy began showing signals of a slowdown in the mid-90s.
Says Bharat Forge CMD Baba Kalyani, “Fundamentally, the trigger for our going international was the downturn in the domestic market in 1996. With idle capacities on our hand, we started exploring the international market. We were more successful than what we thought we would be, and five years ago we began our journey from being an exporter to becoming a global player.” In less than a decade, Kalyani has transformed Bharat Forge into a global forging major.
Boston Consulting Group chairman Arun Maira says overseas revenue generated by manufacturing companies will only increase in the future. “Indian companies are emerging as global low-cost manufacturers of value-added products. There are two reasons for this. First, the presence of large number of skilled engineers and technicians. And second, the expertise that Indian companies have acquired over the years in design, engineering and processes,” says Maira.
India Inc’s international odyssey really began in the early 90s when top flight IT and pharma companies first caught the global virus with a ‘dare to dream’ foreign focus. Soon, they were able to successfully penetrate international markets, with dollar earnings accounting for a bulk of their revenues.
Consider these numbers. Overseas revenues account for 98 percent of InfosysÂ’ total earnings, 96 percent of Satyam ComputersÂ’ revenues, 88 percent of TCSÂ’, 75 percent of WiproÂ’s, 73 percent of RanbaxyÂ’s, 59 percent of Dr ReddyÂ’s LaboratoriesÂ’ and 58 percent of WockhardtÂ’s.
Patni Computers and i-flex, of course, take the cake with global sales accounting for 100% of their topline. Says Infosys CEO Nandan Nilekani: “We had no choice. When we began in the early 1980s there was no domestic market for software and we had to focus on global markets to grow.”
Adds, Ranbaxy president (pharmaceuticals) Malvinder Singh: “Our decision to go global was taken in the early 1990s. We had leadership in the domestic market, but the domestic market constituted only 1.5% of the total pharma market. We realized that we could grow only if we targeted the global market.”
Be that as it may, exports are only one route for going global. Over the past few years, Indian companies have established subsidiaries, joint ventures, and manufacturing facilities abroad to consolidate their international presence, the paper said.
They have also aggressively used the M&A route to acquire foreign companies, manufacturing units and sales and distribution networks to boost global incomes.
Indian companies are reckoned to have inked 62 overseas deals worth $1.4 billion in the first nine months of the current year, against deals worth $202 million in Â’02.
In the pharma sector alone, Indian companies have made 18 international acquisitions in less than two years with an aggregate deal value of more than Rs 2,100 crore.
In the auto component sector, Indian companies have taken over more than 10 foreign firms during this period. Bharat Forge has been involved in four overseas buyouts in the past two years, and according to Citigroup, acquisitions have accounted for 45 percent of the companyÂ’s consolidated revenues in this period, the paper said.