Quotes of the Day

You have probably never heard of Essel Propack but there's a fair chance you have squeezed one of its products. The Bombay company is the largest manufacturer of laminated tubes in the world. Most toothpaste these days is packaged in such tubes and one-third of global supply comes from Essel Propack's 20 factories in 13 countries across Africa, Asia, Europe, and North and South America. The company also churns out tubes for cosmetics, pharmaceutical creams, hair-care products and food. It may not be the sexiest industry, but the business is growing fast and Essel is determined to be its biggest player. "We definitely see an opportunity to move further into the global space," says R. Chandrasekhar, Essel Propack's president. "India always had a global outlook in the past but we became very inward-looking after independence. Now we're back."

Glance through the business news these days and it quickly becomes apparent Chandrasekhar is right. As international business leaders prepare to arrive in New Delhi for the World Economic Forum's annual India Economic Summit, India is ending decades of isolation. Indian companies have returned to global commerce. Indian-born business executives are climbing the corporate ladders at well-known multinationals, some to the highest rungs. Meanwhile, Indian companies, flush with cash from a booming domestic economy, are prowling for overseas acquisitions to expand their footprints. The most recent headline grabber was last month's $8.1 billion bid by Tata Steel for Anglo-Dutch steel manufacturer Corus, and there have been many smaller deals as well. In February, Hyderabad-based drugmaker Dr. Reddy's acquired German-based rival Betapharm for $572 million. A few months later, construction major Punj Lloyd bought Singapore-based SembCorp Engineers and Constructors for $22.5 million. And now electronics manufacturer Videocon is the lead player in a consortium that has offered more than $700 million to buy Korean electronics giant Daewoo Electronics.

In the first 10 months of 2006, Indian companies cut more than $10 billion worth of cross-border deals, up from about $1 billion in all of 2000. According to Dealogic, which tracks global M&A activity, Indian companies this year have spent twice as much on overseas acquisitions as foreign companies have invested in India. "There is a real bullishness" among the leaders of Indian industry, says Sabeer Bhatia, the Indian-born co-founder of Hotmail, the Web-based e-mail system acquired by Microsoft in 1997. "Every single Indian CEO is looking outwards to see how he or she can expand their own base and expand into newer markets."

One reason Indian companies are suddenly going abroad is that they can. For years, government controls and restrictions?the infamous "license Raj"?shielded Indian businesses from foreign competition, isolating them and stifling innovation. But in the early 1990s, the government began to slowly open up the economy. Anticipating an eventual onslaught from outsiders, the country's more far-sighted industrialists decided to modernize their operations. As a result, the most efficient businesses were able to reap outsized profits as India's economic growth began to accelerate, explains Delphine Cavalier, a Paris-based economist at BNP Paribas, which has advised Indian companies on M&A activity in Europe. "Today, with competition now mounting in India, those same groups are seeking to protect that profitability by taking their activity abroad, knowing that continued economic growth in India will provide a strong base for years to come," Cavalier says.

New Delhi also helped clear the way for the recent buying spree. Last year, the government doubled the cap on how much Indian companies can annually invest abroad to 200% of a company's net worth. Thanks to the boom at home?India's GDP growth has averaged 8% a year over the past three years?many companies are financially stronger than ever before. Net profits are up nearly 40% this year, according to a recent report from Motilal Oswal Securities, which surveyed 127 publicly traded companies from various sectors. Besides having deep pockets, many Indian companies have been around for decades; they've got experienced managers who are confident in their ability to run large, complex organizations. "They're not like start-ups," says Bhatia, "so they say, 'you know, our balance sheet is actually stronger than some of our counterparts in London, or Europe, or America. We might as well buy these brands and make use of our low-cost manufacturing base to branch out into other markets outside of India.'"

That's certainly the logic behind many of the recent deals. "[Economic] liberalization made Indian companies a lot more competitive globally, especially when it comes to price," says Ranjit Pandit, a director at consultancy firm McKinsey & Company in Bombay. "The two things missing were customer access and certain advanced technologies." It's much faster to buy what you need than spend years building it up yourself. By purchasing Corus, for example, low-cost steel producer Tata Steel hopes to get access to technology to make more sophisticated products, as well as a European client base. By bidding for Daewoo, Videocon seeks a foothold in East Asian markets and an extended global marketing-and-sales network. There are other compelling reasons to go abroad. International exposure may be essential for Indian companies to maintain high sales-growth rates. Because of a host of problems at home, such as pervasive poverty and obsolete, overtaxed transportation and power networks, India's most successful companies have in some ways already outrun the Indian economy and are now simply spreading their bets. "I will apply my money where my judgment thinks it can make the maximum return," says Videocon chairman Venugopal Dhoot. "Business is business everywhere."

It's important to keep the country's acquisitiveness in perspective. Companies in other rapidly developing nations such as China and Brazil are also heading overseas. From 2002 to 2006, for example, India made 176 investments in Europe, according to Invest in France Agency, a government-backed investment-promotion group. China wasn't far behind with 114 deals over the same period. And last week, a Brazilian steel group?Companhia Siderúrgica Nacional?challenged Tata Steel's bid for Corus by making a preliminary $8.5 billion offer, 4.4% more than Tata's buyout proposal. Says Rajat Gupta, former global managing director of McKinsey & Company and the first Indian-born CEO of a large U.S. multinational: "It's a gathering trend, but to say that we are somehow uniquely terrific at globalizing, I don't think the evidence supports that. There is no track record yet of Indian companies."

Still, Indian businessmen are proving to be unusually adept in the international arena. It helps that millions of them already speak English, the global language of commerce. India is also a free-market democracy with a legal system that, though frustratingly slow, is easy for Westerners to understand. The country has longstanding cultural and trade ties with the rest of the world, which adds "a comfort factor" to its business dealings overseas, says Andrew Cahn, chief executive of UK Trade & Investment, a government body that supports foreign companies looking to invest in Britain. To be sure, Indian companies occasionally run into xenophobia and protectionism. Earlier this year, Indian-born Lakshmi Mittal's $33.5 billion purchase of Arcelor, Europe's top steel producer, was initially opposed by CEO Guy Dollé, who said Mittal's company?Mittal Steel, the largest steel producer in the world?was "eau de cologne" compared with the "perfume" of Arcelor. But India's forays abroad have so far proved less controversial than those launched from that other emerging economic superpower, China. According to Sanjaya Baru, an adviser to Indian Prime Minister Manmohan Singh, that's because major Chinese companies are usually partly or wholly owned by government entities, which can raise doubts about their management's motives. "Private companies in India are private," Baru says. "They are not an extension of the government."

Being annexed by India Inc. might also be more palatable to some because individual managers and entrepreneurs from the subcontinent are familiar faces overseas. Driven in the past by lack of opportunity at home, India's best and brightest have long studied and worked in the U.S. and Europe. America's high-tech sector in particular has an unusual concentration of Indian workers. Some 13% of all private, venture-backed start-up companies in the U.S. are founded by Indian immigrants, according to a study released this month by the National Venture Capital Association. Many of Silicon Valley's high-tech leaders are of Indian origin, among them Prabhakar Raghavan, 45, head of Yahoo!'s research division. After finishing college in India, Raghavan migrated to the U.S. and earned a Ph.D. in computer science at the University of California, Berkeley, before joining IBM. "Indians are looked upon not only as technical wizards but, beyond that, as people who can make things happen," he says.

The diaspora has spread beyond Silicon Valley. Indian-born executives have in recent years taken the reins at some of the world's biggest companies. Arun Sarin, a native of Madhya Pradesh in central India, is CEO of Britain's Vodafone. Three months ago, Indra Nooyi was named CEO of PepsiCo after serving five years as the U.S. beverage giant's CFO. Indians have credibility as managers, says Hemant Luthra, head of the Systems & Automotive Technologies division at Indian car-and-tractor manufacturer Mahindra & Mahindra. This was not always so. Luthra remembers visiting Hong Kong in 1991 when India's government was close to bankruptcy. "I had $100 in my pocket and if I went into a watch shop the salesmen would instantly show me the cheapest watches just because I was Indian," he says. Three years ago, Mahindra tried to buy Finland's biggest tractor company. Luthra says Finnish newspapers ran stories "asking how dare an Indian look at buying Finland's crown jewels?" But those things don't happen to him anymore, he says. "When we go and talk to these people in Germany or the U.K., it's a given that we're professional managers capable of running a huge business," says Luthra, who last month was juggling the final details of four separate acquisitions. "My biggest problem is finding the bandwidth to look at all the opportunities that come across my desk every day."

India's economic and business bandwidth is likely to continue growing. Take Essel Propack. The toothpaste-tube maker has begun to diversify in more profitable markets by buying a British company that makes packaging for upscale cosmetics and toiletries, and a U.S. company that makes medical products like catheters and esophageal balloons. "We'll keep looking for the right opportunities," says Essel Propack's managing director Ashok Goel. "And when we see something we like, we'll go for it." As Indian companies following that same script continue to expand overseas, in the future we'll be buying more than toothpaste tubes stamped "Made in India."

• Simon Robinson | Bombay
• As once insular Indian companies prowl the planet for acquisitions, Indian-born executives are taking charge at some of the world?s top multinationals