31 jan 07- A LANDMARK DATE FOR MY COMPANY

TATA STEEL - THE UNSTOPPABLE GOLIATH

Well as I sit down to write this post, I reflect on what "old economy " companies are capable of. We may all be taken by the glitz and glamour of US corporations setting shop in India, but there are companies like Tata steel which are setting shops outside heralding the arrival of the "INDIAN MNC." Uncle sam diehards, beware.
INDIANS ARE COMING.What looked like a failed venture for my company a few months back,has ben turned upside down. Starting from a lowly price bid of 450 pence, the deal was clinched at 608 pence....shows the immense strength and tenacity that went into decision making.kudos to Mr. RATAN TATA, Mr. MUTHURAN for the exemplary guts and strategy displayed. The fall in share prices was hoped fOR, the gain in synergies will soon offset the temporary glitches.
Here 's the newspaper version (THE HINDU: 31 JAN 07)

NEW DELHI: Tata Steel's successful takeover of Corus Group Plc - Europe's second largest and the world's eight-largest steel maker - has catapulted it to fifth position among world's top steel producers.

From a mere 5.6 million tonnes, the Corus acquisition will multiply Tata Steel's total production capacity to 23.8 million tonnes. The deal also leaves domestic major SAIL far behind as the state-run company has a capacity of only 13.4 MT and is ranked 1 6th in the world.

Following are the top ten steel makers (with annual production in millions of tonnes):

1. Arcelor-Mittal (Luxembourg) - 109.7 MT

2. Nippon Steel (Japan) - 32.0 MT

3. Posco (South Korea) - 30.5 MT

4. JFE (Japan) - 29.9 MT

5. Tata-Corus (India) - 23.8 MT

6. Baosteel (China) - 22.7 MT

7. US Steel (USA) - 19.3 MT

8. Nucor (USA) - 18.4 MT

9. Riva (Italy) - 17.5 MT

10. ThyssenKrupp (Germany) - 16.5 MT - PTI
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Mumbai/London Jan 30 The Indian corporate world watched with bated breath as Tata Steel and Brazil's CSN entered the final lap of the race for Anglo-Dutch steel maker Corus, heading for a closed-door auction in London late Tuesday.

It is a new experience for India, as it is arguably the first time in its history that a home grown corporate is participating in this kind of auction for a global takeover.

At the time of going to press, half-an-hour before the high-profile auction, neither of the two suitors had submitted a revised offer, as was expected in certain quarters.

Both the companies, instead, got prepared to battle it out at the closed-door nine-round auction.

Suspense was also palpable at the Corus headquarters in London, as well as at the auction venue. The suspense was accentuated by the secrecy that shrouded the strategies finalised by both the companies for the bidding battle.

For, it was not just the Tata top-brass or their Brazilian competitors CSN who played their cards close to the chest while bidding for Corus. Lawyers and industry representatives involved with the final lunge to the finish line were equally tight-lipped.

Pointing out that the deal was poised sensitively, a solicitor familiar with the case told Business Line that the auction procedure varied depending on what the clients wanted.

Indicating that it would not be an auction in the traditional sense of the term, a spokesperson for the Tatas in London said that the auction process could combine both online and physical transactions, as was seen the last two times a similar auction had been conducted in the UK.

The parties involved could be at different locations and the transaction could be online or the auction could be held at a `remote' location, he said, unwilling to divulge details.

The auction method to end long-drawn bidding dramas for companies was introduced by the UK's regulatory Takeover Panel in 2002. It has since been used in two cases, in the bid for property group Canary Wharf in 2004 and when online auction firm QXL Ricardo went under the hammer in 2005.

The auction process is expected to last for about ten hours and comprise nine bidding rounds and a result is anticipated at around 0300 GMT on Wednesday morning (8.30 am IST).

Corus is Europe's second-largest steel maker and the world's ninth-largest, producing around 18 million tonnes per year

food for thought ( 25 Jan 07)

The Hindu businesss line dated 25 jan 07

Intersting revelations:



India's influence on the world economy will be bigger and quicker than what was implied earlier, Goldman Sachs has reported.
Arguing that the country's high growth rate since 2003 represents a structural increase (rather than simply a cyclical upturn), the financial powerhouse has projected India's "potential or sustainable growth rate" at about 8 per cent until 2020.
"The recent growth spurt was achieved primarily through a surge in productivity, which we believe can be sustained. India is well-positioned to reap the benefits of favourable demographics, including an `urbanisation bonus', and a further rise in capital accumulation, in part from an upsurge in foreign direct investment," the report has mentioned.

The risk to the country's growth stems from political issues (including a rise in protectionism), supply-side constraints (including business climate, education and labour market reforms), and environmental degradation.

Productivity growth, which is driving the increase, is expected to continue over the medium term.

A turnaround in manufacturing productivity has been central to the productivity growth, it is contended

.

" These reports should not however make us complacent.Instead it should reinforce
our basic thrust on infrastructure developement and take measures to bridge the growing regional disparities."

The private sector was the principal driver of this turnaround as it improved efficiency in the face of increased competition. The underlying reasons are: increased openness to trade, investment in information and communication technology, and greater financial deepening. These factors still have some distance to run, Goldman Sachs has opined.

Here are some highlights from the report:

* India has 10 of the 30 fastest-growing urban areas in the world. Based on current trends, a massive 700 million people (roughly equivalent to the current population of Europe) will move to cities by 2050. This will have significant implications for demand for urban infrastructure, real estate, and services.

* Policies to enhance financial sector growth, openness to trade, rural-urban migration, capital formation, education, and environment — together labelled the `FORCE' factors — will be critical to sustaining growth.

* Assuming that policies to open up the financial sector remain on track, including the entry of foreign banks starting from 2009, there will be more "financial deepening". This will contribute to increases in productivity in the medium term.

* Today, India is the fastest growing market for mobile phones, with average growth rates of over 80 per cent every year since 2000.

* The success of India's elite students from IITs and IIMs masks the generally abysmal state of higher education in India. Higher education remains heavily regulated, with little to encourage private-sector participation or innovation.

Mergers and acqusitions

Heres an intersting take on Mergers and acquisitions done by India Inc.

(Source : The hindu 06 Jan06)

Newspapers are abuzz with speculation. India is emerging a vibrant player in the world of mergers and acquisitions (M&A). Not long ago, Mr Lakshmi Mittal acquired Arcelor, and had Tata Steel's bid for the Corus group of the UK gone through, it would have made the company the world's fifth largest producer. Tata Group companies and many in the information technology, pharmaceutical and banking sectors have made a host of other acquisitions. Could anybody have imagined such a showing by Indian entrepreneurs even a few years ago?

"Apart from the financial part,I think it reflects a change of mindset of our people.The Cosmopolitan culture celebrating India has truly arrived."


In many areas, India is emerging at the top. A leader in Information Technology, India was designated the third most attractive research and development centre in the world by Unctad (United Nations Conference on Trade and Development) in its World Investment Report (WIR), 2005. India is also the biggest foreign investor in the UK, outpacing even the US.
There has been a spurt in overseas investments by India.

From $0.7 billion in 2000-01, the overseas investments increased to $2.7 billion in 2005-06 and would have soared to $11 billion in 2006-07 had the Tata's Corus buy gone through; that is, it would be almost double the inbound foreign direct investments, estimated at around $5.5 billion for 2006-07. The industries that attracted Indian investments included metal, energy, pharmaceutical, IT and banking. But why M&As?
Six reasons, according to the former Ranbaxy CEO, Mr D. S. Brar, drive M&As:

Accessing new markets, maintaining growth momentum, acquiring visibility and international brands, buying cutting-edge technology rather than importing it, developing new product mixes, improving operating margins and efficiencies, and taking on the global competition. Unctad's WIR 2006 pointed out four factors that drive developing nations to go global. First, it helps market penetration. Indian multinational corporations looking for niche markets — such as IT services and pharmaceutical products — gained substantially through outbound investments.

Second, rising labour costs at home push MNCs abroad. Third, competitive pressures in the domestic economy force MNCs to invest abroad. Fourth, home government policy liberalisations stimulate outbound investments; indeed, since 2003, New Delhi has taken steps to liberalise overseas investments.

According to Unctad's WIR 2006, developing and transition economies have emerged significant outward investors, as this has become an important tool for development of the domestic economy.

`Emerging' investors


In 1990, only six developing and transition countries had made any outward investment. In 2005, the number had increased to 25. Between 1987 and 2005, the share of global M&As by MNCs from developing and transition countries rose from 4 per cent to 13 per cent in value terms, and their share in greenfield and expansion projects exceeded 15 per cent in 2005.

This buoyancy of overseas investment by the developing and transition countries is mainly because of India and China that are emerging the significant players. Happily they are not in competition as in the case of inbound foreign direct investments. Their objectives of and destinations for overseas investment are different.

Comparisons with China


Though China has also stepped up its overseas investments they are of little consequence vis-à-vis the FDI inflows into the country, which touched $60 billion. China's direct investments overseas were $6.92 billion in 2005, up 25.8 per cent over the previous year. Also, while Indian investments are northwards, Chinese investment are south-south. In 2005-06 and 2006-07, over 80 per cent of Indian investment abroad was made in the US and the UK. As much as 60 per cent of China's overseas investments flowed into Asian countries.

Though India's public sector took the lead in investing abroad, especially looking for oil assets, the private sector is now going full speed ahead, driving overseas investments. In China, state enterprises and the public sector have been the principal investors. In 2004, 80 per cent of China's outbound investments was made by state and public sector-owned enterprises. However, a major share of China's private overseas investment is tied with "round tripping" funds (estimated at 15-20 per cent), flowing from tax havens such as Hong Kong, the Cayman Islands and the Virgin Islands — the three largest destinations for outward investments.

From this perspective, India's outbound investment is more accountable in global FDI outflow than China's. India's primary motive is to increase market penetration while China's aim is to bolster its domestic industries.


Eyebrows have been raised over the rapid growth in India's investments abroad, but that should be no reason to curb them as the benefits they bring to domestic industry are many and significant.

The most important benefit that the developing and transition economies derive from outward investments is increased competitiveness. This strengthens the arms of local companies and of the MNCs to survive in a competitive milieu. Therefore, the more the domestic industries invest abroad, the more the benefits to the home economy.

(The author is Adviser, Japan External Trade Organisation (JETRO). The views are personal.)