india inc

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The Coming of Age of India Inc ( by A.P. Business Standard of 16/01/03).

Many colleagues and friends reacting quite negatively to my last article on the

change in mindset of corporate India asked me quite bluntly for the evidence,

and while my comments and observations were anecdotal in nature, it set me

think as to was there really any evidence to support my assertions? After some

thought I realized that there were more than enough signs pointing to India Inc

taking its place on the global map.

Take for example the recent case Dr Reddy’s won against Pfizer challenging its

patents for Norvasc (a billion drug). Reddy’s victory was written about by

every Wall Street pharmaceutical analyst of significance and also had an impact

on Pfizer’s share price. Five years ago, would any Indian company have the

audacity and resources to challenge a global industry leader over a billion

dollar product in the US courts, win a summary judgement and knock billions of

dollars off the market capitalization of the global leader.

Look at the case of Infosys, while it is still not in the class of TSMC

(Taiwanese semi-conductor foundry) whose guidance affects overall technology

sentiment; Infy is tracked now by every major global technology investor and

every major IT services analyst on Wall Street watches it’s every move and

results / guidance with interest. Its business model in terms of global

delivery is now being copied by the EDS and Accenture’s of the world. five

years ago was any Indian company even tracked by global analysts or considered

as a role model for the future shape of its industry? This change is not

restricted just to pharma and software, you have the example of Bharat Forge

which is among the top five forging manufactures in the world or Hero Honda

which is the largest two-wheeler company in the word today, so the change in

terms of becoming globally relevant is apparent in manufacturing as well.

The change is also evident in terms of transaction sizes. The Infosys second ADR

of $ 300-400 million will be one of the largest transactions completed on the

Nasdaq over the past two years. The TCS IPO will be one of the largest

non-privatization transactions in the emerging markets in 2003. The Reliance

gas find off the coast of India is reputed to be the most significant / largest

discovery of 2002. The Reliance Infocomm CDMA contract was the largest

Greenfield CDMA telecom contract awarded in all of 2002 with the most ambitious

rollout schedule ever attempted. The successful launch and rollout of CDMA in

India is critical to the earnings guidance / analyst expectations provided by

Qualcomm and Lucent for 2002/2003. If for some reason the Reliance rollout were

to be delayed or failed, both Lucent and Qualcomm would miss their 2003 earnings

estimates. When was the last time a contract in India had the power to make or

break the earnings of global industry leaders?

The National Highway Development Project is one of the largest road projects

contemplated anywhere in recent years and hopefully will just be the beginning

of further mega infrastructure projects.

The point is clear, India Inc has come of age, what it does or does not do in

many sectors has global sectoral implications and impacts global industry

leaders. India Inc is now actively tracked by global analysts in many areas.

This is not something we could have said even five years ago.

Thus for all the India bears out there, they should wake up and see the change,

it is apparent if you only look. There has been a sea change in the scale,

efficiency, mindset and global relevance of India Inc, which is not fully

appreciated in my view.

I am not trying to make the case that everything is great and fine in the

country, undoubtedly a lot more structural reform is needed, at a faster pace

and we have serious social issues to worry about.

While it is useful for investors to remain skeptical to keep pressure on the

government, I don’t think India Inc is getting enough credit from global

investors for the micro level change that has occurred.

Having been burned by the India hype of the mid to late 90’s, investors are

missing the woods for the trees. As one famous investor always tells me, when

looking at structural secular change, investors always overestimate the

short-term impact of the change and get disappointed (India mid to late 90’s)

but consistently underestimate the longer-term impact and implications of the

change (India mid 2000’s). This is exactly what investors are guilty of doing

today in terms of their approach to the Indian corporate sector. This is of

course in my humble opinion.

end, Together let us make Bharat a economic and military giant.

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