New player in global investing: India Inc.

India Inc. is going global.

After years of staying safely within their own borders, Indian firms are venturing beyond the subcontinent with conviction, looking to become the Sonys of the next century.

The August announcement that Indian megaconglomeration Tata spent $677 million for a 30 percent share of Energy Brands, which makes Glaceau Vitaminwater in the United States, was a signal flare. Now, Tata is prepared to pay $9.3 billion for a Netherlands-based steel company, while India's Videocon has reportedly made a$700 million bidfor South Korea's Daewoo Electronics.

By the standards of global mergers and acquisitions, it is still relatively small-time stuff. But for India, it is an utterly new adventure in capitalism – one that many experts suggest is merely the initial step down a road that Japan, Taiwan, and China have trodden, as Indian brands emerge from the obscure onto drugstore shelves and showroom floors from Spain to Singapore.

"As reasonably large economies become a part of the global trading system, they become international brand names," says Adil Zainulbhai, managing director of the consulting firm McKinsey & Company in India. "We fully expect to see a fair number of Indian companies doing that, and this is just the leading edge."

The range of ventures is broad. The everpresent Tata group has bought the Pierre hotel in New York for its Taj hotel chain and is in the process of buying the Ritz-Carlton in Boston – the oldest continuously running Ritz-Carlton in the US. After a string of smaller purchases, Indian pharmaceutical company Ranbaxy recently acquired Romania's Terapia for $324 million. And Bangalore's United Breweries has put in a bid reported to be in the area of $750 million for Scottish whiskey distiller Whyte & Mackay.

So far in 2006, Indian firms have spent $7.5 billion abroad, compared with $4.5 billion in 2005 and $1.5 billion in 2004, according to Dealogic, an industry tracking firm. The simple reason is that Indian companies have more money to spend. While the growth in the domestic market here has helped, international investors have provided the real fiscal fuel. Investors are looking to put their money into companies with high growth potential, leading many to Indian firms. As a result, stock prices for Indian companies are consistently valued three to four times higher than Western ones with the same revenues. That gives them disproportionate buying power.

It also acts as a dinner bell for venture capitalists seeking the next big thing. US private-equity firm Ripplewood Holdings is teaming with Videocon in the ongoing effort to buy Daewoo Electronics, and Sequoia Capital helped Hyderabad-based AppLabs Technologies become the world's largest software-tester. It purchased Britain's IS Integration for $37 million.

"For companies in India, this is the first time that we have gotten access to real capital," says Sashi Reddi, chief executive officer of AppLabs.

Page: 1 | 2