As 2007 draws to a close, its defining feature clearly is the global foray of India Inc. Having kicked off with Tata Steel?s acquisition of Corus for $12.2 billion, the year-end saw that group bid for Jaguar and Land Rover. It was the year of such cross-border M&As. Leading Indian corporates are rapidly internationalising, thanks to a more liberal policy regime for overseas investment.
Many of India Inc?s overseas acquisitions are leveraged buyouts that take place through special purpose vehicles set up to raise finances from the global market (not just banks, also private equity funds). Many firms have clear access to global capital markets. Little wonder that India?s large groups are leading the way. However, India Inc?s growing internationalisation?identified as those firms having at least one depository receipt programme, having raised equity capital in international markets or being listed on the London Stock Exchange, Nasdaq or New York Stock Exchange?cannot be generalised across the developing world. The reality is that relatively few countries and few firms actively participate in international markets, according to a paper presented by Stijn Claessens and Sergio Schmukler at a recent meeting of the NIPFP-DEA research programme on capital flows in Delhi.
Their findings are based on a large sample of 39,517 firms from 111 countries covering the period 1989-2000. Only about 2,500 firms or 6.4% of these are international firms, of which 889 or 35% belong to 82-odd developing countries?dominated by those from. China, Mexico, South Africa, India, Brazil, Russia and Korea. The time pattern of internationalisation of developing countries is also more volatile, with the number of firms going global rising during the initial years of the sample peaking to 177 firms annually in 1994, and then tapering off substantially to below 80 new firms annually by 2000.
Looking ahead, more firms from this select group of developing countries (China and India mainly) are likely to seek a place in the global sun. According to BCG?s latest ranking of 100 companies from 14 rapidly developing countries that are changing the world, as many as 41 of these are from China, followed by 20 from India.
Such firms are typically large and fast growing, many of which have already crossed or approaching threshold levels of $1 billion in revenues to go global.