Company Outsider: Why Indian giants are buying abroad again

It has echoes of a similar surge 18 years ago when large Indian companies went on a global acquisition spree. Yet, beneath the surface similarities lies a fundamental shift in motivation that reflects the changing global economic landscape.

The parallels with 2006-07 are striking. Back then, Indian companies embarked on a remarkable series of overseas acquisitions, including Tata Steel's $13 billion purchase of Corus, Tata Motors' acquisition of Jaguar Land Rover for $2.3 billion, Hindalco's $6 billion takeover of Novelis, and Bharti Airtel's expansion into Africa through various deals including buying Zain's African operations. These deals announced their global arrival and were emblematic of India Inc's newfound confidence during the golden age of globalization. Backed by favourable credit conditions, these acquisitions were driven by a desire to access new markets, acquire cutting-edge technology, and build international brands.

In scale, the current round of acquisitions is similar. Tata Motors is putting down its biggest-ever cheque for an overseas buy, while Jindal's ThyssenKrupp bid could be worth €3-4 billion, according to reports.

However, the strategic rationale underlying today's acquisitions tells a fundamentally different story. Where the 2006-07 wave was offensive, aimed at global expansion and market capture, the current trend appears increasingly defensive, designed to hedge against the rising tide of deglobalization and protectionism in global trade dynamics. US president Donald Trump's tariff wars, which have seen the imposition of sweeping duties on many products, signal a broader retreat from the free-trade consensus that had dominated international commerce for decades. The EU, too, has introduced its own carbon border adjustment mechanisms with serious implications for Indian exporters.

Jindal's acquisition strategy explicitly acknowledges this new reality, with plans to transform ThyssenKrupp Steel Europe into Europe's largest integrated low-emission steel producer. This positioning isn't just about environmental credentials; it's about buying market access in an era where carbon content and local production are becoming competitive advantages. Similarly, the Tata-Iveco merger is a part of its geographic diversification to provide crucial insurance against regional trade disruptions and regulatory barriers.

In his 2022 analysis, economist and former Reserve Bank of India governor Raghuram Rajan warned that "the possibilities for climate action will be set back by the shrinkage of cross-border trade and investment flows, and by the accompanying rise of increasingly isolated regional trading blocs." While he was addressing climate policy, his observations about fragmented global trade apply equally to global trade.

Large Indian companies have figured that the retreat of globalization is a major threat, and reacted by looking at overseas assets. Cross-border M&A deals surged by 66% in the first nine months of 2024 compared to the same period in 2023. This dramatically outpaced global deal value growth of just 10%. This shows that Indian companies are pursuing a distinct strategy driven by protectionist pressures rather than following global trends.

The defensive nature of these acquisitions becomes clearer when viewed through the lens of "friendshoring" and supply-chain nationalism. Jindal's pledge of over €2 billion in investment to expand ThyssenKrupp's operations isn't just about capacity building but also about establishing legitimate manufacturing credentials in Europe. This strategy addresses a crucial vulnerability that Indian exporters face: the growing tendency of developed markets to impose anti-dumping duties, carbon tariffs, and other non-tariff barriers on imports from developing countries.

The World Bank's 2023 analysis underlined these concerns, noting that "protectionist measures are on the rise" and "trade tensions and geopolitical challenges are raising concerns about the trajectory of globalization," despite evidence that global trade has historically "increased incomes by 24 percent worldwide."

The contrast between the two waves of Indian acquisitions reveals a broader truth about global economic evolution. The 2006-07 spree represented the high-water mark of globalization optimism, when Indian companies believed they could conquer global markets through scale and ambition alone. The current wave reflects a more sobering recognition that success in a fragmenting world requires local presence and manufacturing citizenship.