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Indian MNEs focus on Europe for investment

CHENNAI: Indian multinational enterprises (MNEs) have become significant investors in global business markets, according to a survey of Indian MNEs investing outside India.

The survey was done by the Indian School of Business (ISB) and the Vale Columbia Center on Sustainable International Investment (VCC) at Columbia University in New York. It is part of a long-term study of the rapid global expansion of MNEs from emerging markets, in particular from the so-called BRIC countries — Brazil, Russia, India and China.

The survey establishes a baseline against which subsequent developments can be measured. It identifies 24 large multinationals and ranks them on the basis of their foreign assets. These 24 companies are among the largest outward investors from India. In 2006, they jointly accounted for $15.3 billion in foreign assets and $12.7 billion in foreign sales. With 441 foreign affiliates in 75 countries, they engaged 60,000 in employees abroad.

The leading company on the list of 24 was the state-controlled Oil and Natural Gas Corporation (ONGC), which accounted for 31 per cent of the foreign assets on the list. It was followed by the Tata Group, accounting for a further 27 per cent. The Tata Group, which includes Tata Steel, Tata Chemicals, Tata Consultancy Services (IT), Tata Motors and Tata Communications (telecoms), among other companies, had the largest number of employees abroad, just under 25,000. The ranking by foreign assets draws on 2006 data. However, the study goes beyond that to provide information about large Indian investments in 2007 as well. The largest brownfield investment (that is, investment through a merger or acquisition targeting an existing company) in 2007 was the Tata Steel acquisition of Corus Group (the U.K.) for about $12.7 billion. The largest greenfield investment was by GAIL, which invested $4.2 billion in petrochemicals in Saudi Arabia. The foreign assets of India’s top MNEs could have doubled in 2007, given the large increases in outward investment in that year. Outward M&A deals alone surged to nearly $25 billion in 2007, says the study. The study also finds the Indian firms (like their Chinese counterparts) seek natural resources abroad. They also seek to leverage India’s special edge in areas such as information technology and pharmaceuticals. Eight of the 24 companies surveyed have foreign investments in IT and five in pharmaceuticals. Since IT is not a capital-intensive sector, the concentration of Indian investment, judged by assets, continues to be in energy and metals.

The study also finds Indian multinationals focussing on Europe as an investment location, which accounts for more than a third of all their foreign affiliates, with Asia a somewhat distant second with just over a fifth.

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