These new Indian giants have swiftly overtaken long-established Western competitors, at least in terms of market value, in recent months. Their lightning-speed growth may usher in a new spate of foreign partnerships, overseas takeovers and competition for resources and talent.

Fueled in part by overseas investors seeking refuge from exposure to the US subprime mortgage mess, Indian stocks have risen faster than other Asian markets in recent weeks. The Bombay Stock Exchange’s benchmark Sensex shattered records for 10 consecutive trading days until closing down just slightly on Thursday at 17,777.14 points. That is up 35 per cent so far this year.

The index is up 35 per cent since the beginning of the year. “All of a sudden, India has these world-beating, serious market cap companies,” said L Brooks Entwistle, Chief Executive of Goldman Sachs in India.

Corporate growth
The real estate company DLF, for example, which just started traded in July with a $2.3 billion initial public offering, has grown to a market value of $30 billion - making it roughly the size of Marriot International and Hilton Hotels combined.

Reliance Industries, the largest publicly traded company in the country, hit a market value of more than $80 billion this week, up from $6.5 billion four and a half years ago and about double the size of Dow Chemical.

The market capitalisation of Bharti Airtel, the telecommunications giant, nearly reached $45 billion this week, making it triple the size of Qwest.

An increase in market value does not mean these companies are shopping for big deals - Marriot, for example, is probably safe from the clutches of DLF.

Many big Indian companies trade only on local exchanges, which means that their stock is not a viable currency to buy a foreign company.

Instead, they are busy pouring money into the home market, where growth outstrips Europe and the United States, bankers say. “The Indian corporate sector is talking of investing $500 billion in domestic projects in the country in the next three years,” said Chanda Kochhar, Deputy Managing Director, ICICI Bank.

Buying suppliers
Buyouts are also being planned - but they are not to acquire customers or clients, as they would be in developed economies, Ms Kochhar said. Instead, companies are looking at buying suppliers (for example, power producers looking at coal mines) or distribution networks.

Dozens of such deals are in the pipeline, she said. A large market value also makes Indian companies even stronger global competitors for everything from resources and talent to partnerships and clients, attracting more foreign investors.

A bigger market value can make it easier for fast-growing companies to get bigger. Indian companies that tried to raise small amounts of capital, say $10 million, on the equity markets in the past were passed over by most big foreign institutional investors, said Shriram Iyer, Head of Research at Edelweiss Securities in Mumbai. But now that they have grown and are looking to raise $50 million or $100 million.

Issues involved
So far this year, Indian companies have issued about $42.6 billion in debt and equity, according to Thomson Financial, up from $32 billion last year. Companies can use a high share price in several ways, from all-share acquisitions of cheaper valued companies, to raising cash by stripping assets, paying expensive people to join the company using shares, said Nilesh Jasani, India Strategist for Credit Suisse. There are some concerns that Indian markets are overblown, even in the Indian government. Finance Minister P Chidambaram warned that retail investors should use “Caution” if entering the market now. And raising funds is not a cake walk, no matter how well the markets are performing.

“Indian companies and their global ambitions are not immune to what is going on in the credit markets globally,” Entwistle said. They often rely on overseas financing to do deals, he said, which needs to be taken into account. Nonetheless, the mood is unmistakably bullish. “There aren’t too many large acquisitions you can make within India, because there are no willing sellers,” Iyer said. Instead, “Everyone wants to grow” he said.

Source: International Herald Tribune