Awaiting the Great Nano Flood of 2010

Potential consumer segments and its conversion to Nano market

Last year Bihar faced flood that it hadn’t seen for fifty years and no one had any clue as what measure would be required to curtail it. yesterday Tata motors launched it people car- nano, which will be available to public by mid this year. Government, public & private institutions seem to be unaware and under-prepared for the NANO flood, which will grip the nation 2010 onwards.

Though nano potential market in India has been sized by many investment firms, but as the product itself is evolutionary, so will evolve its customers. In a country where public transportation has been never been emphasized on the potential is enormous. India young population is filled with such potential, we at the potential buyers which will come into being once Nano hits the market.

Nano is most likely to emerge as second car of choice for the family, where even housewives would demand, from grocery shopping to mall shopping, Nano is going to emerge as the transporting alternative for shopping escapades of upper-class Indian housewives and middle-class families which have long been waiting for second cheap alternative.
A large number of collage going crowd which till now ply on two-wheeler ranging from Rs 50,000 to 1Lac. Soon, a large number of them would be turning towards Nano, this conversion would further flood not only the road but already cramped educational institutions, which may have to invest in parking lots than on labs.

Semi-urban areas are another two-wheeler bastion, which will get dismantled by introduction of Nano car. More are more people are likely to dump three-wheeler autos and expensive SUVs for tata nano, which for some-time will have smooth run in the narrow lanes of small cities. But,

What’s Wrong with Tata’s Global Footprint Strategy

Tata aggressive stance of acquiring companies globally and developing global presence has gone wrong. Tatas are now painfully recognizing the fact that they in for more trouble for their overleveraged acquisitions of giant steel and niche automotive player. Tata’s Jaguar & LandRover (JLR) unit has already asked for the £1 Bn of loan from the government, there were also news of Tatas picking up money from the market at higher interest rates to keep its JLR unit afloat. Tata Corus is already on cost cutting spree and has asked Dutch government for its staff realization program.

So, what went wrong with Tata’s strategy of developing Global presence and become a world player in almost every spree of its business?

Tata’s core strategy was evading regional and nation business cycles, to implement this strategy Tatas needed to generate revenue from world over and setup manufacturing units to ratonalise the cost. Tatas made assumption that if business cycle in a country/region goes through trough then its companies can survive on demand and revenue from other regions. Tata never thought what would happen if different regions go into recession simultaneously. The thought of global recession never concurred to Tatas as “decoupling theory” was very popular at that point of time.

The other major mistake that Tatas did was it has been unable to accrue production cost benefit from its takeover. It invested in highly niche automotive companies like JLR, which can’t be produced world over thus production cost are difficult to rationalise. The other acquisition, Corus, runs on thin margin and high costs; Corus hasn’t been able to cut costs yet, though it may be able to do it successfully in future but it is taking toll of Tatas.

Tata & Ambanis: Ethics Vs Acumen

In span of few months we have seen that one industry house has failed in its dealing with the government while other has succeeded in its endeavor to gain business. While, Tatas are sulking at the failure to break the political deadlock over its ambitious small car project; Ambanis have successfully negotiated with their political adversaries and twisted proposals for windfall tax.

Irony exists between the two industrial houses (well its three now but thinking more or less unites Ambanis). One of the oldest business houses, Tata, believe in more old fashioned way of creating wealth, setting up private ventures with financial institutions. But, they are quite modern about business ethics and governance. Ambanis, on the other hand are more flamboyant with creating wealth for themselves and public through public investment. Though, the same public (and even government) doesn’t have a hint about the company structure and shareholding pattern.

Both Ambanis and Tata pursue policy matters but Ambanis do it more aggressively, they manage to get politicians on every committee to lobby for them. The Ambanis have been maneuvering policies for their good; if something would adversely impact their business they never hesitate to reach out to the top. Tatas on the other hand wait for the policy announcement to come out. Tatas had to scuttle their aviation project with Singapore Airlines due to policy hurdle but Ambanis never had to. One Ambani kept windfall tax at bay; the other prevented scrapping of dadri power project and got into Pension Fund management, where it was not even shortlisted.

But, Ambanis had to pack up their retail biz in many states. Tatas to had trouble with land acquisition in past but not as much as it is in Singur. Also, Tatas seem to have been unable to use their experience in dealing with states that have had inconsistent economic policy (i.e.Bihar, Chattisgarh) with respect to Bengal. They really believed that communist would replicate china’s model without any trouble. Ambanis have been cleverer in continuously amending their offer for land acquisition in case of MahSEZ in new Mumbai. One thing that is visible is none of the Indian industrial houses have learned lesson to tackle is public unrest over industrial projects.

Indian Companies Most Bullish in Overseas Acquistion

Reinforcing the growing clout presence of Indian corporates in the international market, an analysis of deals between emerging and developed economies since 2003 by KPMG, showed that there were 322 completed deals where Indian buyers have acquired companies in the major developed economies. This, compared to 340 deals completed in the opposite direction, where developed economy entities bought into India, as per the study by Emerging Markets International Acquisition Tracker (EMIAT).

India is also far ahead of other BRIC economies in terms of becoming a net exporter of deals. Within EMIAT, in volume terms, the country’s outbound deals now equate to 95% of their inbound total. By comparison, Russia boasts a 30% figure, while China and Brazil lag behind at 12% and 9 % respectively.

High-profile buyouts such as Indian conglomerate Tata's acquisition of Jaguar-Land Rover and mega-merger with Corus are just the tip of the iceberg. Many of the deals clocked by KPMG are relatively small; the average value may be just $50 mn, once the huge players such as Tata and drug giant Ranbaxy are excluded. Takeover targets have also been diverse, from Whyte and Mackay whisky, bought by United Breweries last year, to London's oldest stockbroker ‘Hichens, Harrison & Co’ bought by Religare Enterprises.

Meanwhile in first half of 2008, the EMIAT study shows that, 51 Indian companies closed deals in developed countries, while Russian companies bought 11 firms and South Korean companies closed 8 deals. For India, the outbound deals (51) outpaced inbound deals (17) in the first half of this year. And, going by the trend, this country is surely on its way to become to a net “deal exporter” by next year.