Global headwinds and muted demand will test the resilience of Indian groups making a global splash

In the summer of 2000, Tata Tea acquired UK’s Tetley Tea for $450 million. Nothing spectacular, you might imagine. But it bordered on sheer audacity. After all, the buyer had a net worth of just $114 million and was gobbling a much bigger company, with a revenue of $264 million. Tata Tea saw a strategic rationale for the leveraged buyout (using debt to acquire a company and leveraging the acquired company’s assets as collateral). It gave Tata Tea access to international markets with significant play and scale.

Soon, going global became a stated ambition for Indian corporates. In the past, barring a few exceptions, domestic business houses had an overseas presence through exports or small offices. But the Tetley deal marked the coming of age of India Inc. and start of a phase that saw Indian companies go on a shopping spree across the world.

Over time, that presence would cut across sectors. Be it automobiles, information technology and enabled services (IT/ITeS), telecommunications, fast-moving consumer goods, metals, textiles, hotels, pharmaceuticals, or pretty much anything else, the global map is now dotted with the ubiquitous Indian flag. This July, Tata Motors bought Iveco, an Italian commercial vehicle manufacturer, for $4.4 billion. This made it the Indian automaker’s largest acquisition ever and topped the $2.3 billion purchase of Jaguar and Land Rover (JLR) in 2008.

While there are enough reasons to be happy, the path to 2047 will be very different. Geopolitical tensions, technology invasion, and a disruption of the world order are some of the issues that Indian companies will have to contend with as they fulfill their global ambitions.

Well Begun

The opening up of the Indian economy in 1991 put the country quickly into the global arena. Picking out that phase, Subramanian Sarma, Deputy Managing Director & President, L&T, says a breakthrough was the exodus of highly skilled professionals to the US during Y2K. “It fundamentally shifted global perceptions about India, which was about our talent, capability, and potential,” he says.

That was later followed by Tata Steel acquiring the British Dutch steel company Corus in 2007, which was four times its size, and later JLR, from Ford Motor Company, in 2008. Another prominent deal was Aditya Birla Group company Hindalco’s acquisition of Novelis in 2007. At the same time, Indian IT companies shifted into high gear alongside global trends, initially driven by Y2K, followed by a surge in contracts and, eventually, mergers and acquisitions (M&As).

“These developments not only enhanced India’s brand globally but also demonstrated the ability to deliver in both manufacturing and services. Since then, India Inc has never looked back,” says Sarma. For his company, the global journey began in the early 2000s. According to him, its manufacturing business began supplying critical, high-precision equipment to clients across the Americas, Europe, and the Far East.

The timing of some of these global forays is important from India’s domestic perspective. The progress from 1991 to around 2004-05 was driven by a series of reforms. For a young and rapidly developing country, infrastructure demand was both urgent and rapidly evolving.

Janmejaya Sinha, Chairman (Asia-Pacific), BCG, says creation of infrastructure led to a continued growth momentum in India and, more importantly, enhanced India’s contribution to the global gross domestic product (GDP). “From just 1-1.5%, it is at a much healthier 3.5% today and (would be) over 6% by 2030.”

Specifically, for Indian MNCs, one big opportunity is the German Mittelstand (small and medium family-owned enterprises), says Sinha. “These businesses have leading market positions in a segment or high talent density, but the owners are aging, with their children often not interested in running the business. They could be good partnering or buying opportunities.”

Building An Identity

The Mahindra Group’s global journey began with “four wheels and a bold idea.” It goes back over 70 years when Mahindra assembled the Willys Jeep. “That single product would go on to define rural transportation in India and become a symbol of rugged, reliable power,” Anish Shah, Group CEO & MD, says. It made the group ambitious to not just serve the domestic market but, as he puts it, “make India matter on the world stage.”

The trajectory of its tractor business is another fitting example, starting with assembling International Harvester, then manufacturing its own, and eventually becoming the world’s largest by volume. “We steadily pushed the boundaries of what was possible for an Indian company.” The companies acquired over the years include SsangYong Motor Company, Peugeot Motorcycles, Reva Electric Car Company, Jiangling Tractor Company, and Kinetic Motor Company.

According to Romal Shetty, CEO, Deloitte South Asia, the M&A route fast-tracks a company’s foray into a market. “A good example is Tata Motors’ buyout of JLR. It gave them a presence across multiple markets, which otherwise would have taken a lot of time,” he says.

The approach in each case varies depending on the industry. Girish Ramachandran, President (Growth Markets), TCS, outlines two things that his company did.

“If we had to be a multinational, it meant working with local companies in each market. It helped in understanding the environment a lot better,” he says. The tactic did work overtime, and he shares data to prove the point. Of the top 10 banks in the world, TCS works with six of the top ten retailers, apart from the top ten pharmaceutical companies. “The other thing was recognising talent available across the world. This led to setting up global delivery centres,” he says. Overall, local talent is what drives the business.

While M&As work for companies from sectors like automobiles, infrastructure, FMCG, among others, companies from the IT/ITES sector are involved in creating joint ventures, partnerships, or collaborating with overseas companies. The turn of the millennium wasn’t just symbolic; it exposed a deep flaw in global computer systems and provided a bigger opportunity for India’s IT industry.

Ramachandran says the momentum had to stay. “It became clear that TCS or Indian IT companies in general could help with technology around the world. That was a big tipping point since it gave us the confidence to accelerate, get into every market and go after businesses there,” he says. India’s unique advantage was in its deep pool of English-speaking, technically skilled talent that could deliver quality software services at a global scale and competitive costs.

For companies, the global journey is fraught with challenges, requiring them to navigate multicultural environments and adapt to unpredictable regulatory landscapes. Big buyouts in a sector like pharmaceuticals, difficult in the best of times, come to mind. The Mahindra Group had its own set of challenges with SsangYong, a South Korean automotive brand it bought in 2011. In late 2020, SsangYong filed for bankruptcy, followed by Mahindra selling its stake, two years later, to a consortium led by Edison Motors. The key lesson in cross-border buyouts across companies comes down to how companies get it right on timing, cultural integration and dynamics of evolving markets.

During this global journey, the perception of India Inc has strengthened. Dipali Goenka, MD & CEO, Welspun Living, points out that India has moved from the periphery to the core of global business. “Our companies are now being recognised as high-value strategic partners and not just cost-efficient manufacturers. This shift has been driven by a sharper focus on technology, sustainability and consumer-centric thinking, making our products more relevant and desirable across markets,” she says.

Emphasising the point that her company has been the highest exporter of home textiles from India for 13 years in a row, Goenka speaks of her company’s strong relationships with large retailers across the US and Europe, among other key markets. “We recently launched a state-of-the-art facility in the US, reinforcing our commitment to being locally relevant and globally competitive.” need for more

Without doubt, 2047 is more than just a landmark year in view of the government’s Viksit Bharat target. Goenka says companies must place technology and innovation at the heart of the strategy, “whether it is adoption of AI, advancing clean energy solutions or developing circular manufacturing processes.”

An emphasis on research and development (R&D) or innovation can never be exaggerated, and it calls for a lot of perseverance. Shetty is quick to explain how India spends just 0.65% of its GDP on R&D. “It is 2.5% for China and 3% in case of the US. We are very good with services but must have products, which can come only from R&D and innovation,” he says. The solution is clear—invest more.

The more critical question is what some of the industries need to do? According to Ravee Chitoor, Professor of Strategy and International Business, Gustavon School of Business, University of Victoria, Canada, to become stronger means moving up the value chain. “Pharmaceutical companies are already quite international, but they need to move from generics to branded generics to more complex formulations and, ultimately, novel chemical entities backed by original research. Similarly, IT services need to adapt to AI-driven products and services and ultimately move into more value-added consulting,” he says.

In the context of IT, TCS’s Ramachandran points towards the pandemic to elucidate how much things have changed. “Before Covid, there was technology in every business. Since then, every business has become a technology business, and if you look at it today, every business is powered by technology.” Drawing a comparison between Y2K and the pandemic, he thinks the former brought Indian IT companies to the fore. “The prowess of technology from India came through (in Y2K), while Covid was about how technology could help businesses. The whole digitisation piece was more global, making it very significant,” he says. Understandably, going global entices India Inc not just for the scale that some markets offer. “It is enormous, especially in categories like bed, bath, and home solutions. It naturally pushes us to think beyond borders, not just for more market share but to stay close to the people whom we serve,” says Welspun’s Goenka.

Blueprint For 2047

To be fair, this journey, while being impressive, has a long way to go. India has only nine companies in the 2024 Fortune Global 500 list, while China has 128, Chitoor explains. “Even smaller economies like Canada and the Netherlands have 14 and 11 companies, respectively,” he says.

There is little to doubt the potential of our domestic market, but if companies want to be global multinationals, an aggressive approach outside India is necessary. “Many new-age companies like Alphabet and Shopify are born global, in the sense that they look to establish their presence in international markets early in life.” To do that, Indian companies need to step up on both resources and capabilities in the spheres of marketing/branding or technology/R&D. “Quality of people is a very important factor. Like Korea and China, did decades ago, India should consciously attract the best talent from across the world by creating enabling conditions,” he adds.

Across industries, the mindset surrounding global expansion has undergone a significant shift. It is not a discretionary choice but a strategic imperative. L&T’s Sarma says a worldwide presence derisks the business. “That provides natural hedging, be it geographic, economic, or sectoral. More importantly, the approach creates an opportunity to benchmark ourselves against the best in the world,” he says. For L&T, that makes it stronger domestically. “Exposure to global best practices translates into higher value creation back home. In many ways, a global presence becomes a catalyst for overall organisational maturity and excellence.”

If GDP is a barometer, there is reason to be happy. From $2.4 trillion at the beginning of the decade, the stated ambition is to hit $7 trillion by 2030. “That kind of growth is a rarity except in the case of the US and China,” says BCG’s Sinha. The route to 2030, he says, will be determined by technology or how AI determines productivity, geopolitical tensions, and our ability to deal with a multipolarsupply chain.

By 2047, existing industries are expected to get stronger, and the relatively nascent ones are likely to achieve scale. Deloitte’s Shetty is clear that it is only a question of time before defence exports start to take off with greater privatisation. “You only have to see how big defence exports in countries like US, UK, France and Germany are today,” he says. Other emerging areas, in his view, are AI and quantum, both being natural areas of strength for India. “As a country, we have the resilience. All our companies need to understand technology and it is a question of time before brand India gets bigger on the global scale.”

Nothing is complete without a look at the geopolitical scenario. According to Chittoor, the US is still home to the largest number of MNCs because it has created facilitating conditions to get the best of people, technologies and raw materials from anywhere in the world. “As we speak, they are losing out on this advantage due to barriers erected by the Trump administration. India should do the opposite by creating conditions that existed in the US for decades that enabled it to attract the best talent and technologies,” he says. The opportunity is staring us in the face and seldom is it of that magnitude. That moment is now, and India must seize it. Not just for 2047 but many years beyond that as well.

@krishnagopalan