India Inc India Inc: Thursday, 10 May 2012 12:02

Indian firms prefer M&As in internationalisation spree

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ISB_logoThe global ambitions of Indian companies have been realised largely as a result of mergers and acquisitions, according to a new survey. The Indian School of Business (ISB) and Brazil’s Fundacao Dom Cabrall (FDC) conducted a transnationality study of companies.

They found that 20 top Indian firms together hold assets worth $80 billion abroad. The total foreign revenues of these 20 companies are estimated at $126 billion, with the top five contributing 69 per cent of the total.

According to the Transnationality Ranking of Indian companies, the top five companies in the list have a Transnationality Index (TNI) greater than 50 per cent, with Tata Steel topping the list.

A large number of companies in the TNI rankings have followed the strategy of inorganic growth through aggressive overseas acquisitions. These transnational companies have shown a tendency for direct acquisition rather than minority acquisitions and joint ventures.

The Tata Group leads the rung of globalised Indian companies with its “smart acquisitions”, including Jaguar Land Rover and Tetley.

The largest acquisition between 2006 and 2011 has been Tata Steel’s takeover of Anglo-Dutch steel major Corus for $14.7 billion, closely followed by Bharti Airtel’s acquisition of Zain Telecom for $10.7 billion.

The TNI combines three measures – percentage of international assets to total assets, percentage of international revenues to total revenues and percentage of overseas employees to total employees – to determine the overall degree of internationalisation of companies.

The survey divided the ranking of companies by TNI into two categories. While Tata Steel stood first among companies which have an international asset base greater than $500 million, Core Education & Technologies topped the list among companies with an international asset base between $150-500 million.

Reliance Industries Limited, Tata Group, Hindaclo, Infosys and Wipro figure among the top five transnational companies (TNCs), along with the public sector oil major Oil and Natural Gas Corporation (ONGC).

The ISB study covers the period between financial year 2008-09 and financial year 2010-11 and is based on data from 33 companies from the top 50 companies ranked by their consolidated international assets.

The ranking methodology is based on a framework (Transnationality Index) developed by the United Nations Conference on Trade and Development.

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