Why some Indian companies are tigers abroad, lambs at home
Indian companies have over the years chosen to look for markets abroad to get away from the stifling regulatory conditions in India, besides being drawn by the prospects for growth

Despite its struggles in India, Tata Motors Ltd continues to outshine many of its global peers with the remarkable success of its 2008 acquisition of the Jaguar Land Rover businesses from Ford Motor. The Jaguar brand, driven by such bestsellers as the F-PACE as well as the XE totted up record sales of 12,310 units in April, up 54%. According to Bloomberg, following its scorching run, Jaguar is even threatening storied Porsche when it comes to US sales.
Tata Motors is already the world’s fifth-largest truck and fourth-largest bus manufacturer with operations in the UK, South Korea, Thailand, South Africa and Indonesia; so, its success should come as no surprise. That it does is on account of its continuing failures in the domestic market for passenger cars.
The auto maker is one of only a handful of Indian companies whose success in tougher global markets is offset by the baffling lack of it back home. There are companies in sectors like pharmaceuticals, auto components and textiles that have succeeded in finding scale and margins abroad but not made much of a dent within the country.
The IT services industry is a perfect example. Almost all the leading companies started life as domestic sellers of hardware or software. Infosys Ltd, for instance, sold packaged products from companies like Borland Software Corporation, while Wipro Ltd and HCL were both assemblers and sellers of hardware in the local market when they started out. And while it made sense for them to seek out global customers given the small size of the local market at that stage, the fact is even after the Indian market for IT services opened up with large outsourcing contracts available from telcos and financial institutions, it wasn’t the Indian IT services providers that made the cut.
The lucrative billion dollar back office management contracts from the big telcos have invariably gone to multinationals. Last year, for instance, Ericsson snagged a $500 million pan-India managed services deal from Bharti Airtel. The Swedish company already manages Reliance Communications’ (R-Com) pan-India network, a deal worth a billion dollars when it was signed in December 2014. Similarly, Vodafone India has a five-year IT outsourcing contract with IBM Corp. believed to be worth well over half a billion dollars.
Indian companies have over the years chosen to look for markets abroad to get away from the stifling regulatory conditions in India, besides being drawn by the prospects for growth that the sheer size of the opportunity presents. The Indian market is also highly price-sensitive; so, success entails a very delicate balance of quality and price. In addition, India is a highly heterogeneous market with customer demand highly fragmented. In Europe as also in North America by contrast, the customer base is much more homogenized. A Jaguar or a Ferrari has its own audience, which is unaffected by the decline in the overall market for automobiles. In India, by contrast, the market tends to get spliced into so many thin groups that viability becomes difficult. And, of course, the sheer difficulty of starting business favours an incumbent over a new entrant, as even steel magnate Lakshmi Niwas Mittal found to his consternation.
Around 2005 and 2006, buoyed by the momentum of its overseas acquisitions, ArcelorMittal, the world’s largest steelmaker announced mega projects in Jharkhand and Odisha, entailing investments in excess of $12 billion on each project. Later, it announced plans for a $6 billion project in Karnataka. Ten years later, all the plans have come a cropper. In 2013, the company said it was exiting the Odisha project following inordinate external delays and difficulties in securing captive iron ore resources. Earlier this year, the company said it is looking at setting up a solar farm on land allotted to it for the proposed 6 MT Karnataka project in view of the global glut in steel capacity and delays in securing raw materials. And recently, the environment ministry also shot down the Rs50,000 crore proposal from ArcelorMittal for a mining project in Jharkhand.
ArcelorMittal, of course, is a victim of the commodities bust and has had its share of grief abroad. Perhaps, it’s not differential performance, but different markets and different profitability for the same processes. India does not have the wherewithal to pay for biogenetic research, so a company that seeks capital and markets for work in that area will end up going abroad.
The Indian market pays a company that goes to the bottom of the pyramid. Thus, Airtel took a sophisticated product to the masses while Maruti Suzuki India Ltd fought off competition with a similar strategy. The nature of companies like Apollo Hospitals and Narayan Hrudayalaya is different from ones like Bharat Forge, or even Infosys. Above all, as Tata Motors’ success with Jaguar shows, there is a difference in the mindset needed to run a global operation vis-à-vis one at home.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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