The curse of the columnist has finally struck! My fingers are frozen at the keyboard with nary a worthwhile topic in my head. As I cast my mind around at the fortnight’s happenings, nothing dramatic jumps out. Yes, sure, there are a number of topics which could be worth writing about were it not for the fact that I would need to take a position, and thereby jeopardise my carefully maintained non-controversial approach. I wish, like Sucheta Dalal, I could freely expound on the mysteries of the recent large cement deal; or expound on the continuing saga of the internecine shadow war in one of our large corporate houses, and describe its latest corporate governance exposes. I wish I could talk about the continuing inflows of FII money and the increasing reliance (there, that word again!) of the local market on such money, as well as the increasing ownership by foreigners of Indian assets, particularly of some of our key financial institutions. Believe me, I don’t want to come across as one of the swadeshi types (although I did return to the homeland after many years abroad, as did Mohan Bhargava), but it is an interesting point to note nevertheless
But on a more serious note, it does mean that globalisation is here to stay. Whether we like it or not, and whether Indian corporates wish to go overseas or not, globalisation has arrived and will continue to arrive in many different forms, and we must react to it. Of course, some Indian companies have been doing rather well out of globalisation. I am talking of course of the software, BPO and pharma companies. But as the Indian market develops faster and becomes bigger and more sophisticated on a sustained basis, we will have more FDI interest as well. This means the M&A market will become more active and management control will change hands more often. We will have more sectors where home-grown companies will have to compete with large foreign multinationals, and don’t be surprised if some of them sell out over time. Sectors such as insurance, retail, media, financial services, telecom, cement, oil, etc will see significant ownership churn in the future. Ten years from now, the existing ownership patterns may be quite different from those prevailing now. I anticipate that there will be larger and more monolithic entities, and more foreign ownership. Deal sizes for mergers and acquisitions (M&A) will be much larger, some smaller groups will have exited their main businesses altogether as it becomes harder to compete. Significantly, more multinationals will have entered the market. What would it mean for the Indian consumer? More world class products and services, for one. More variety and importance for the Indian market within the MNC network, for another. There will be larger Indian companies that will truly be world class in size and operations. The Indian MNC will be a reality and there will be a few of them in different sectors, although they might still be medium-sized at best by global standards. For investors, there will hopefully be better corporate governance norms and a capital market that is even more integrated into world markets.
Hopefully, the market, too, will have broken out of its current trading band. Regulators will be tested, the challenge being to modernise India’s takeover norms, listing requirements and company affairs guidelines. And to ensure that there are no insider trading violations in the run-up to large M&A transactions, and minority shareholders are protected. The challenge for Indian businessmen will be to think global, be culturally astute, self confident and assertive in developing their business. We will see more Indian entities enter the global rankings, and making waves. The days of under-confidence for Indian companies are firmly behind us. Over time, we will also see more Indians heading some of the large global companies.
• M&A market will become more active, management control will change often
• For the Indian consumer, globalisation will mean world-class products
Will all this happen smoothly? I doubt it. There will be much noise along the way, changes in government, mis-steps on policy, much reformist and leftist talk, much hand-wringing, many irregularities, many, many deb-ates, a few large M&A transactions, a few elections, and many more articles (hopefully of better quality than this one!). But then that is India—and the one thing we do know for sure is that at the very least it will be entertaining!