Sir Frederick Upcott, then chief commissioner of the Great Indian Peninsular Railway, once derisively promised to eat every pound of steel rail that the Tata iron and steel mill succeeds in making -- so sure, he was, that steel production would be beyond an Indian company; for steel was literally the building blocks of the industrial age and British colonial rule. Undaunted, the Tata Group, led by second generation owner Sir Dorab Tata, successfully rolled off the first ingot in 1912. Sir Frederick was nowhere to be seen.

In 2007, a century on, Tata Steel, part of the conglomerate Tata Group, made a successful bid of US$12.1 billion for Corus Steel - which was formed by a 1999 merger of Netherlands-based Koninklijke Hoogovens, and, with no small degree of irony, British Steel, itself an amalgamation of 14 main British steel mills.

When Tata Motors, another Tata company, bought over Land Rover and Jaguar -- two storied British brands for US$2.3 billion, the message could not be any clearer: Indian companies, following decades of post-independence mediocrity, have emerged as global business powerhouses.

It would be interesting to hypothesise what Sir Frederick would say upon seeing all these happenings - something that the authors of India's Global Powerhouses - How they are taking on the world might be tempted to do, but did not.

Rather, lead author Nirmalya Kumar, marketing professor at London Business School, and his two co-authors, Pradipta K. Mohapatra, CEO of Technology Business Sector at India's RPG Group, and Suj Chandrasekhar, principal at Strategic Insights, weaved together a very readable account and analysis on this subject that makes any further jibes unnecessary.

Everyone knows that India, often mentioned in the same breath as Brazil, China and Russia, is emerging as a leading economic power. But what makes India's story more exciting is that its outward expansion has been driven largely by private companies, and not state-owned enterprises as was more so in China.

Like their German, Japanese, and Korean predecessors, Indian companies that go global will transform the world of businesses. Corporations in the developed world will increasingly see India and its companies emerge as acquirers of their assets, as global competitors using India's scale and cost advantages, as partners for enhancing the competitiveness of their global value chain, as a high-growth market, and as a source of new energy and dreams for the world economy, the authors wrote.

The facts and figures are already pointing this way. As recent as 2001, India's outward investment was less than US$1 billion. The country was actively courting foreign direct investments (FDI) instead. The crossover point was reached in 2006, when outward investment of US$10 billion overtook total FDI that year. The wave hit a crescendo in the first two months of 2007, when some 40 foreign deals were inked with a total value of US$21 billion.

Unique characteristics

The book allocated a fair bit of space to the overall picture - from the constraints and socialist thinking behind the post-independence economy, to why economic liberalisation finally took place in the 1990s, and then, how rapid growth was attained.

But, the book is more than just a broad, historical sweep. It also provided closer analysis, explaining, for example, what the unique characteristics of Indian companies are, and why they don't always play by the same rules.

For example, when Indian companies make deals, they don't do so alone. Rather, they come from a position where they can easily call upon the muscle of an entire conglomerate or business grouping, like the Tata, or Aditya Birla companies.

Also, Indian companies are used to higher levels of debt. This means they would have no qualms about leveraging heavily in financing overseas acquisitions to levels beyond the comfort level of most Western companies.

Next, many Indian firms, despite being publicly-listed, are often dominated by powerful owners and their families. They exert a level of control, decisiveness, and agility that professional managers, bound by the rules of corporate governance, cannot match.

While it is only to be expected that some of these Indian acquirers will stumble because they have either paid too much or taken on large amounts of debt, the overall trend remains unaffected. The era of India as a major overseas investor is here. The question is not how to stop this trend but how to deal with it. There was a time when Westerners assumed that an Indian in the head office of a multinational or Western company was either an accountant or a computer nerd. Nowadays, that person is just as likely to be the boss, the authors wrote.

Moving beyond broad pronouncements like these, the meat of this book is the page-turning description of the various Indian powerhouses, spiced with the most exciting nuggets of anecdotes, coupled with crystallised gems of management lessons dished out by the various business leaders. Just one example: a European executive quipped that only God could figure out the complexity of the banking systems which i-flex solutions, a financial software provider, was in talks with. Rajesh Hukku, i-flex's chairman, responded: Sir, we are Indians. We are very religious, and very close to God. The deal was closed.


Of course, i-flex is but just one of the various Indian IT majors. If there is one standard bearer that best epitomises the growing global presence of Indian companies that we know today, it has to be IT services giant Infosys. The company was started by seven computer engineers with a capital of US$250 in 1981 and by March 2008, the company had more than 91,000 workers, and 98% of its US$4 billion revenue was from outside India.

Audacity makes for a compelling story, and Infosys is no exception, the authors wrote, tracing the company's rise, where along the way it broke down barriers, overcame deep-rooted scepticism among the very multinational clients that have now happily outsourced all kinds of IT work to the company.

Infosys also made history by being the first Indian company to list on the Nasdaq in 1999. If we're going to be a global company and our clients are going to be global, then being listed in their market is going to give our customers confidence that this is a company that can be trusted, said CEO Nandan Nikelani.

The company's influence went beyond the IT industry. Infosys has sparked the entrepreneurial dreams and confidence of an entire nation, while creating a whole new generation of middle-class Indians, the authors wrote.


If Infosys made its indelible mark on the global IT industry, Mittal did the same for steel. Lakshmi Mittal, armed with savvy deal-making skills and a commonsensical approach to management, put together a hotchpotch of steel mills that were often bankrupted, state-owned, and basically badly-run operations in developing countries. From Mexico, to Kazakhstan, to Trinidad & Tabago, mills that nobody wanted to touch, Mittal took over and turned around. Along the way, he created the world's largest steel company, three times the size of the next biggest competitor. Of course, there was the epic US$33.6 billion hostile takeover of Arcelor in 2006 that gave the company its present name: ArcelorMittal.

Aditya Mittal, son of Lakshmi and CFO of the company, said that there is no magic to the series of successful turnarounds. It is simple and strong management. First you have to diagnose what is the real issue, and then you have to make sure that the management team and the company is completely focused on resolving the critical issue. The focus has to be on understanding the number one critical issue and resolving it first with all focus, dedication, and time. As each turnaround situation has a different focus issue, identification of that focus issue and resolving it is the most important aspect, he said.

Bharat Forge

While many of these powerhouses are relatively new - at most two decades old, in the case of Bharat Forge, it was a remarkable transformation of a storied Nehru-era company that ran on a central-planning socialist model of production quotas, price controls, and strong employee rights. Under the leadership of chairman and managing director Baba Kalyani, it is now the world's second largest forging company, just behind Germany's ThyssenKrupp.

Kalyani, an MIT-trained engineer, changed the company's strength from muscle power to brain power. He also applied some simple, yet effective strategies in managing and motivating the company's pool of multi-cultural employees.

For example, when Bharat Forge took over a bankrupted plant in Michigan, the unionised workers put up a show of force when Kalyani paid a personal visit. He took a walk around the filthy plant. I couldn't believe it was a plant in the US. I have a habit of going into the locker rooms in plants because I believe that the locker rooms really tell you the story of what is going on. I couldn't believe how people would use that place - stinking, smelly, in really bad shape, said Kalyani. Thus, the first thing I did was to build a new locker room with very clean and modern facilities. It became a symbol of hope, new beginnings, and was a symbol of our commitment.


Indeed, while rich in detailing how various Indian champions have become what they are, the authors go beyond just cheer-leading. They were quick to caution that while companies profiled in the book have made remarkable progress over the past 15 years, this is an evolving story, and the term Indian multinational is still at an embryonic stage. Four pertinent challenges were highlighted.

First, the so-called India challenge, which refers largely to the drag caused by the country's existing political and bureaucratic systems and infrastructure, namely, its army of 10 million civil servants and an inefficient transport system.

Second, India, despite its recent prominence and reams of positive media coverage, still faces a brand challenge. According to the authors, India needs to show the world that it is more than fakirs and call centres.

The next challenge is one that arises in the country's mindset when Indian companies become more active in their overseas acquisitions. When Tata bought Jaguar and Land Rover, there were screaming headlines like Empire Strikes Back. The nationalistic euphoria prevailing in India sometimes appears more like jingoism, the authors opined.

Last but not least, is the talent management challenge, where India's huge population does not necessarily mean enough people with the right combination of language skills, technical know-how and managerial capabilities. The relentless pursuit of the existing limited pool of suitably-skilled, has resulted in rampant inflation of both salaries and job titles.

But of course, despite all these issues, it will still be foolish for anyone to bet against India. In the book, Sir Martin Sorrell, CEO of global advertising agency WPP, said: India and China might have been on the wrong side of history for the past 200 years, but for the next 200 years they will be on the right side of it.

Did Sir Frederick place a wager?