Big bro Tata shows the way for India Inc
The Tatas have over the years earned a reputation of integrity, goodwill and competence, and in one sweeping stroke on Friday they acquired a whole new class — one that is capable of big ticket acquisitions abroad.
Support from the Board of Corus Group to a takeover offer from Tata Steel only goes to prove that Indian companies are not only capable of aiming big, but also funding acquisitions of firms that have four times their revenues.
Tata Steel, which is in its 100th year, offered 455 pence (nearly Rs 161) for every share of its much bigger rival Corus in a deal valued at 4.3 billion pound (Rs 36,550 crore).
The Tata Group, which has 96 companies including 28 listed firms, has a total market capitalisation of 50 billion dollars and accounts for 2.8 per cent of India’s GDP. It is also the country’s largest private sector employer.
Corus’ acquisition marks a giant leap for the group, as the bid amount of 4.3 billion pound surpasses the money it paid for all past takeovers put together.
"We did everything in small increments so we always lagged behind," Tata Group Chairman Ratan Tata said in a comment posted on the group’s website in August.
Before Corus, the Group’s largest acquisition was worth just 677 million dollars for a 30 per cent stake in the US-based Energy Brands Inc, popularly known as Glaceau, in August this year.
Since February 2000, Tatas have made 28 acquisitions, but the Corus deal is the first of its kind for the group, whose plans for greenfield in India and neighbouring Bangladesh have seen frustrating delays.
While Tata Steel put its investment plans in Bangladesh on hold due to political uncertainty, its steel plant project in Orissa has been at the receiving end of social activists.
The Corus deal comes months after Tata Group decided to increase promoters’ stake in Tata Steel to ward off hostile takeover attempts — seen in the light of NRI steel tycoon L N Mittal’s (Mittal Steel) unsolicited bid for Luxembourg- based Arcelor.
Ratan Tata’s statement at the AGM of Tata Steel about increasing promoters’ share in the company, one would have little expected the firm to bid for acquiring a rival, much less a mightier opponent.
While Tata Steel’s plans to increase production capacity suffered delays, the Corus takeover will propel the Indian company to the fifth rank among world’s largest steelmakers from 56 earlier.
Not only has Tata Group set an example for India Inc, but the deal also demonstrates the faith reposed by overseas markets in Indian entrepreneurs.
Since the country’s economy was opened up in the 1990s, Indian firms have become more professional from being family-run entities.
"It (the deal) shows the competitive and financial strength of Indian entrepreneurs to go overseas and acquire assets," Sushil Maroo, Director (Finance), Jindal Steel and Power Limited, said.
SAIL Chairman S K Roongta said the Tata-Corus deal shows the confidence of overseas market in Indian entrepreneurs.
Industry watchers also believe it could ease matters for Indians, who were hitherto facing difficulties in completing such transactions abroad.
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