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2 India's Tata takes on the
world By Siddharth Srivastava
NEW DELHI - Tata Steel's US$11.3 billion
acquisition of Anglo-Dutch steelmaker Corus has
put the spotlight on the Tata Group, one of
India's largest and most respected conglomerates,
as well as raising the international profile of
India's business community as a whole.
The
Tatas are confidently developing a strong
corporate brand strategy, under the leadership of
Ratan Tata, chairman of the
Rs400 billion ($9 billion)
Tata Group.
Tata called the acquisition "a
moment of fulfillment for India. This will prove
to be a visionary move. I have always believed
that if you want to become a global company, you
have to dismiss your notion of being a single
nationality."
Last year, Indian steel
tycoon Lakshmi Mittal clinched a $32 billion
takeover bid for Arcelor Steel, making the
conglomerate the biggest steel producer in the
world. It will now compete with Tata-Corus, the
fifth-biggest.
Another mega-deal waiting
to happen is in the Indian telecom sector after
Hong Kong-based Hutchison Whampoa decided to sell
its 52% stake in the Indian operation Hutch Essar.
The long list of bidders includes both
domestic and foreign players, such as Vodafone,
Anil Ambani-owned Reliance Communication, and
Essar, a joint-venture partner in Hutch. Hutch's
valuation is estimated to be between $21 billion
and $28 billion.
The Tata-Corus deal beats
the existing record held by the country's largest
corporation, Tata Group, which recently acquired
the US-based Glaceau, the maker of health drink
Vitamin Water, for $677 million, then the largest
overseas buyout by a private Indian company.
The Tata-Corus deal is aimed at producing
a vertically integrated global steel group that
leverages the cost-competitiveness of Tata Steel,
one of the world's lowest-cost steel producers,
with Corus' high-value-added product mix and
powerful market presence in automotive,
construction and packaging steel.
The
acquisition marks a high point in India Inc's bid
to become a world player. It will make India a net
exporter of foreign capital for the first time
this fiscal year, which is not a cause for worry
as the country's foreign-exchange reserves should
soon exceed $200 billion because of a rapidly
growing export economy.
According to
global consultancy firm PricewaterhouseCoopers,
India Inc has recorded more mergers and
acquisitions (M&A) in the first half of 2006
than in the whole of 2005.
India has
surpassed China and South Korea to grab the third
position in the Asia-Pacific M&A league table
and is lagging only behind Japan and Australia.
Indian companies struck M&A deals worth $25.6
billion in the first six months of 2006, up from
$8 billion in the first half of 2005, and $23.6
billion for the whole of that year. The majority
of Indian acquisitions have been in Europe and
North America, highlighting Indian companies'
confidence in investing in more developed
economies.
The Tata Group The
synergies in the approach of the Tata Group began
in the late 1990s, when the group executive office
(GEO) was set up as an extension of the chairman's
office at Tata Sons, due to a detailed study on
the Tata brand in 1997. The main finding of the
survey read: "The Tata brand is like someone who
is established, but not modern, large but not
focused, profitable but not in top gear, a warm
person but not efficient.''
The survey
revealed that the Tata brand itself, not its
various factories or plants, is the company's
biggest asset and that it was important to make
the brand relevant to new groups of consumers.
The GEO decided to review the group's business
portfolio and group the companies into seven -
compared with the previous 35 - core sectors:
information systems and communications;
engineering; materials; services; energy; consumer
products; and chemicals.
It also sold many
of its companies - Voltas to Electrolux, Lakme to
HLL and Nerolac to Kansai. The restructuring and
reshuffling led to the signing of the Tata Brand
Equity and Business Promotion Agreement (BEBP).
The BEBP brought all the Tata companies under a
single mark. It was decreed that advertisements
and commercials by any Tata company must carry the
Tata mark.
Tata's aim is to emphasize the
group's strength in the diverse fields it operates
in, while conveying a brand meaning, through a
master brand. Globally, the Tatas are looking to
ride piggyback on established brands.
Progress With an overriding
strategy in place, the Tata Group has progressed
remarkably well. Since February 2000, the Tata
Group has acquired as many as 27 companies
(excluding Corus), both in India and overseas, at
a total cost of more than $3.5 billion.
Today, the Tata Group comprises 93
operating companies in the above-named seven
business sectors.
One of the group's
latest acquisitions, Tata Tea, on August 23,
bought out a 30% stake in US-based Energy Brands
Inc for $677
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