OPINION | Indian Business: Time to dream big, embrace global expansion

One of the areas where India should start to build capacities is global business domination.

Aatmanirbhar Bharat and Viksit Bharat are now firmly entrenched as the leitmotifs of India’s national long-term goal setting. This two-decade journey, which the Indian political and business class now sees as the raison d’être for both policy shaping and narrative building, would entail excelling on multiple fronts simultaneously.

One of the areas where India should start to build capacities is global business domination. So far, the Indian policymaking: both the socialist Nehruvian version and the Rashtriya Swayamsevak Sangh’s swadeshi conception has promoted protection for the domestic industry as a tool of survival. This vision eventually becomes a rent-seeking, low-innovation burden on the country’s economy, where the industry becomes complacent and risk-avoiding in its outlook.

The Aatmanirbhar Bharat vision of Prime Minister Modi has nuanced these ideas, where protection neither clips wings nor the imagination. He has been advocating excellence as the central pillar of self-sufficiency, which is about stacking comprehensive national power and not about proliferating Bombay Clubs.

In this spirit, which embraces Apple and John Deere as much swadeshi as Adani and JSW because they add to India’s knowledge base, skills and local supplier ecosystem, the next logical step would be for the Indian firms to dream bigger.

Outside of the IT services industry, hardly any Indian firm can claim to have become a global brand. It does not mean that Indian firms are not globally recognized, many are known for scale and business dominance in specific segments. But India has not produced a corporate brand, that is feared in the global boardrooms, or which is the basis for case studies in American, Chinese and European business schools alike.

It is time to change this. Indian firms should lookout for acquisition opportunities, especially at a time, where the corporate sector in a huge market with world beating technology capability is struggling for its existence.

Europe is desperately looking for friends or at least co-travellers. India is very much amongst those Europe can have an accommodation with.

European businesses had become addicted to strong four-legged foundation, which now lies in tatters. They had the comfort of American geopolitics cover and defence security, Chinese market, Russian energy and as a bonus – access to large eastern European talent markets, often proficient in science and engineering disciplines. This tripod with a bonus leg has been dismembered with Europe at odds with all three big global powers simultaneously.

On top, European Union was already resisting Chinese control of its businesses even before the Russian special operation in Ukraine shook the very foundation of its export-oriented, trade-surplus focused economic bulwark.

The Regulation (EU) 2019/452, which is also known as the EU Framework for Screening Foreign Direct Investment, is the anchor regulation, which has made it tougher for Chinese firms to acquire their European targets. This directive was adopted in 2019, but only became fully effective in October 2020, establishing a coordinated mechanism for EU member states to review and potentially block foreign investments, particularly from non-EU countries.

In fact, the buying frenzy in Europe is already catching up. Recently, BASF sold a majority stake in its coating unit to Carlyle for just under $7 billion. Warburg Pincus bought Germany’s PSI for $813 million. The American private equity firms are already sensing opportunities and Indian firms need to make quick moves. Tata Motors’ proposed acquisition of Iveco and Jindal Steel’s bid for Thyssenkrupp’s steel unit are great starts.

Many European firms may welcome friendly investment, and even outright purchases, if their people, business and identities are persevered with. Indian firms have already had some merger and acquisition experience in France, Germany and the United Kingdom. It is time to double down on this experience and the favorable credentialism.

The acquisitions or investments need to be centred on just a few key considerations.

Firstly, the European targets should have a collection of patents, which can be valued as part of the deal. India desperately needs greater research and development investments and a culture to sustain these spends. If we can’t move fast enough grounds-up, we can do with external libraries and acquired working cultures to change and enhance ours.

Secondly, Europe has tremendous engineering skill-base. Our firms can look at potential acquisitions in this core strength area. These are also the firms that are the worst hit due to energy price spikes, logistics uncertainties and access to key raw materials. This ambition is perfectly complementary to India’s own manufacturing push under the Aatmanirbhar Bharat drive.

Thirdly, Indian firms should look at acquisition targets with valuation under $10 billion. Attempting to gobble firms bigger than that may lead to regulatory barriers and difficulties in integration post the deal. Corporate valuations in Europe are not super-high, with future cash flows expected to be muted, despite highly differentiated and valuable knowledge native to many firms.

These actions can be the strong scaffolding of the next chapter of Indian industry evolution.

An Aatmanirbhar Bharat and a Viksit Bharat is also a confident Bharat, which not just embraces the world, but in fact provides succour and leadership to our friends who are floundering. Indian industry can take lead in their own way, while the government works on issues closer to statecraft. The era of true Indian multinational companies cannot begin soon enough.