In 2004, just before Tata Motors, the vehicle-making company of the Tata group, acquired Daewoo Commercial Vehicles of South Korea, its managing director Ravi Kant happened to ask a bunch of Daewoo employees about the kind of company they would like to be with. The emphatic answer was: a European company, as it could be relied upon to be efficient and technologically advanced.
 
It took the next three-four days and exhaustive briefings on what the Tata group was about, to convince the Daewoo employees to change their mind and express a wish to be associated with Tata.
 
That was then.

Last October, Jo Haazen, the foremost carillonneur in the world -- the carillon is a musical instrument composed of at least 23 cup-shaped bells played from a baton keyboard, using your fists and feet -- played the Indian national anthem at the town square of Mechelen, in Belgium.
 
The occasion was a reception organised for Gautam Thapar, whose Crompton Greaves had acquired the locally-based Pauwels Group in 2004 and turned it around, saving thousands of jobs.
 
Videocon's chairman, Venugopal Dhoot, is reluctant to talk about it, but those close to him say that Dhoot, on a recent visit to Poland, was given the treatment generally reserved for heads of state. The Dhoots are also lionised in southern Italy, which has one of the large TV factories of the Thomson group, which Videocon acquired a couple of years ago.

And if Tata Steel was able to buy Corus, it was because the Anglo-Dutch steelmaker's top management had almost pre-selected it and come travelling to India in late 2005, to woo the Indian conglomerate. When the Tata bid finally went through, a British newspaper ran the banner headline: "The Empire strikes back".
This is now.

The Turnaround

The change in the way the world views India now is a reflection of how Indian industry has re-engineered itself over the past decade. Take the case of the three automobile giants: Tata Motors made a Rs 500 crore (Rs 5 billion) loss in 2000-01. In the same year, Maruti Udyog reported a loss of Rs 269 crore (Rs 2.69 billion), and Mahindra & Mahindra a small profit of Rs 96.9 crore (Rs 969 million) in 2001-02.
 
Mahindra & Mahindra's 5,000 employees churned out 60 vehicles a day in 1994. Now, the employee strength has dropped to 2,000, and they roll out 160 vehicles daily -- with zero overtime. Back then, M&M's Kandivli plant, near Mumbai, had a quota system under which each worker's actual production time was under 240 minutes a day.
 
Today, every worker puts in 450-460 minutes. And using low-cost engineering manpower, the company's utility vehicle, the Scorpio, was developed at a fifth of the cost of a comparable project in the West. That makes it profitable even at sales of only 40,000-50,000 a year.
 
Symptomatic of the continuous productivity improvement that is under way, the Scorpio's welding spots have been progressively reduced from about 6,000 at launch to 5,500 today.
 
At the much bigger Tata Motors, there were close to 38,000 employees 10 years ago, chalking up an annual turnover of Rs 10,000 crore (Rs 100 billion). The employee strength has come down by 20 per cent while the company's turnover has increased two-and-a-half times. Its Pune plant alone has invested in 100 robots, and Managing Director Ravi Kant says the attitude of "can do" pervades.
 
As for Maruti Udyog, it cut production costs by a staggering 30 per cent in the three years to 2004-05, and increased productivity by 50 per cent. And as soon as those numbers were achieved, it embarked on a fresh programme for further productivity gains and cost savings.
 
The changes show in the financial results. In 2005-06, Maruti made a profit of nearly Rs 1,200 crore (Rs 12 billion), Tata Motors Rs 1,529 crore (Rs 15.29 billion), and M&M Rs 857 crore (Rs 8.57 billion).
 
The changes have been no less dramatic in the steel industry. Tata Steel once feared it was on the chopping block when Chairman Ratan Tata was identifying growth sectors for the group more than a decade ago.
 
Today, it is the toast of the conglomerate after it trimmed its workforce by about half and after 12 of its major plants moved towards zero-accident, zero-breakdown, zero-defect and zero-customer complaints.
 
Over 6,000 continuous improvement projects using value engineering, benchmarking and Juran's Quality Improvement saved over Rs 200 crore (Rs 2 billion). And it now boasts of being the lowest-cost steel producer in the world at an operational cost of $140-145 per tonne of hot-rolled coils.
 
The public sector Steel Authority of India Ltd was also on the chopping block once as the government refused to give it money to fund losses and asked it to privatise. That is because, in 1998, it had 1,77,000 employees who produced 10 million tonnes of steel. Now, having spent Rs 12,000 crore (Rs 120 billion) on modernising its plants, SAIL produces 13 million tonnes with 1,24,000 employees.
 
Easy Money

Three consequences have resulted from the turnaround. First, India is becoming the hub for an unlikely clutch of industries, like automobiles, with virtually every car major in the world now targeting India with small-car projects.
 
Osamu Suzuki, bossman at Suzuki Motors, on a recent visit to India played a round of golf with Ajay Dua, secretary in the government's department of industrial policy, and told him that making small cars in India costs a third less than anywhere else in the world -- including China (where, Suzuki said, labour is more expensive). Ditto with steel -- as companies like South Korea's Posco and a global entrepreneur like Lakshmi Mittal plan mega-projects.
 
The second consequence has been soaring profitability. In the three years to 2005-06, the net sales of 2,954 manufacturing and services companies studied by the Business Standard Research Bureau grew at a compounded annual growth rate of 10.48 per cent while their net profits surged 19.7 per cent (see chart).
 
And from 2004, the rapidly improving profitability encouraged the stock market to begin a bull run that has seen a near-trebling of share prices -- leading to the third consequence, namely, the ability of Indian companies to use a new currency (their shares) to raise the funds with which to fuel growth -- and acquisitions.
 
"The valuation of Indian companies has gone up like anything. When you go abroad, you need to take risks. That risk-taking capacity has gone up due to the rising value of India assets," says Venugopal Dhoot, chairman of Videocon, the consumer durables giant that hopes to use acquisitions to treble in size in short order.
 
But it is not just the availability of easy money that has fuelled India Inc's drive overseas. It is the success at home that has generated a new confidence, apart from providing the bulwark of a base.
 
"Operating in the Indian market is like driving in India. If you can deal with the cow that suddenly jumps in front of your vehicle, you can easily drive in other places, where people follow the rules," says Sumant Sinha, head of corporate finance with the Aditya Vikram Birla Group.
 
"And the home market, big and growing, gave us the size to attack other markets. In many sectors, the home market is no longer big enough. Overseas rivals can suddenly show up at your doorstep," says Sinha. 
 
Lead, don't follow

Typical of the transformation is the case of Atul Punj. As a young man of 33, in the early 1990s, he wanted to get into construction, but various members of his business family told him he was being reckless, that the big guys in the business, like Simon Carves, would not give him any contracts.
 
But Punj did well, and it was a sweet turn of fate when Punj Lloyd, company that he heads, acquired the Singapore-based SembCorp Engineers & Constructors early last year. For Simon Carves is a part of SembCorp. Punj, who looks a decade younger than his 49 years, says he narrated his family's early scepticism to the Simon Carves brass at his first meeting with them after the acquisition. 

THE DEAL MANIA IN 2006 Cross-border and domestic deals
	2005	2006
Value ($ mn)
Domestic	6,848	4,991
Inbound	5,174	5,400
Outbound	4,299	9,914
Total	16,321	20,305
Volume (in numbers)
Domestic	151	214
Inbound	56	76
Outbound	136	190
Total	343	480
Average deal size ($ mn)
Domestic	45	23
Inbound	92	71
Outbound	32	52
Total	48	42
Source: Grant Thornton Note: Figures may not total exactly due to rounding off

There are many Atul Punjs now dotting the map, so the globalisation of Indian enterprise goes beyond Tata's headline-hitting acquisition of Corus and Birla's proposed buy-out of Novelis.
 
There is also (to give a short list) the acquisition of Betapharm by Dr Reddy's in February last year, Terapia by Ranbaxy and Hansen by Suzlon Energy in March, Sabah Forest by Ballarpur Industries and Eight O'Clock Coffee by Tata Tea in June, Jeco Holding by Mahindra & Mahindra in September and Ritz-Carlton Boston by Indian Hotels towards the end of last year.
 
Alok Textiles has bought into Mileta, KPIT Cummins has picked up a majority stake in the US-based SolvCentral, Welspun India has picked up 85 per cent in UK retailer Christy, and Jain Irrigation, set up by a farmer turned trader in 1963, has acquired four companies in the US in the last 18 months.
 
For many companies and groups, the challenge today is to adjust to the dramatic changes that have been wrought. In 2003, when 20 per cent of the Tata group's turnover came from outside India, Chairman Ratan Tata set the goal that 35 per cent of group turnover must come from abroad by 2010. With three years still to go, the figure is already 60 per cent. Last year, in a new-year message to the group that typifies the new confidence of Indian business, Tata said: "We must be bold in our actions. We must always lead -- we must never follow."
 
Dhoot in turn says that 40 per cent of Videocon's revenues and 20 per cent of profits come from abroad. In 2006, as much as 80 per cent of Ranbaxy's sales were overseas. Even Jain will soon have about a fifth of his company's turnover coming from overseas operations.
 
Companies also have to learn to live with a global workforce. Tata Motors, which was a largely India-centric company until three years ago, is now present in South Korea, Italy, Thailand, Spain and South Africa with 1,100 foreigners working for it. It has 51 people, all of them British nationals, in its product development centre in the UK. If Novelis goes through, it will add 12,500 foreign nationals to Hindalco's workforce. Of Videocon's 27,000 global workforce, over 40 per cent is outside the country. And Infosys is busy hiring American B-school graduates and bringing them to Bangalore for training.
 
Alan Rosling, a British national who works at Tata's headquarters, thinks that cross-cultural tensions are likely to be less of a problem for Indians, because of the diversity within the country and, therefore, within even India-bound companies. 
 
Ajay Khanna, who used to head the India Brand Equity Foundation before returning recently to the Confederation of Indian Industry as deputy director-general, argues that foreigners find it easy to work with Indian companies because accounting concepts and the language of business, and even the business concepts used, are all global -- which is not the case in many other emerging markets.
 
It all seems a far cry from the days of the Bombay Club.