April 05, 2020
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The Smeltering Pot

Tatas have shown that Indian firms can dream big, make it happen

The Smeltering Pot
As an Indian, I feel proud about the Tata-Corus deal. In fact, the entire country is proud because it heralds the making of India Inc as a major global player. It's not only the fulfilment of a dream for the Tatas

but for the country too. This deal, especially with all that happened around it, shows India's determination to become a serious player. It seems there's already respect and fear in Europe about India and Indian companies.

I consider this a greater acquisition than L.N. Mittal's big-ticket buyout of Arcelor because it's not only about an Indian entrepreneur acquiring a company which is among the world's top five steelmakers, but also four times the size of Tata Steel. Against this, Mittal's was a global group though the man himself holds an Indian passport. Also, Mittal mostly acquired companies which were of low net worth and were government-owned. It's not the same here.

Ratan Tata also showed killer instinct when he upped the price. The Tata group showed courage by not cowering down. Now the question is whether the move was based on financial parameters, was it driven purely by ego, and whether the Tatas paid too much. But there is no need to worry because the merger benefits would be visible in the medium to long term, when synergies should justify the high price.

What one has to realise is that money is not an issue with the Tata group, so all these fears are baseless. The Tatas are sitting on a war chest. All their group companies are undervalued. If they were to even dilute a small stake in one of their operational arms, say TCS, the inflow would take care of Corus. The Tatas are not one of those humpty-dumpty firms who would be shattered by a $7-8 billion deal.

The deal will also provide Tata Steel with a great impetus to improve operations. The bottomlines of the two are almost same, and the Tatas have scope to improve upon it. Issues like productivity can be given a fresh look now. It can only get better unless, of course, the steel market collapses suddenly due to cyclical reasons, that old bugbear.

The Tatas have also shown that one has to aim big and strive to achieve it. If China can produce 450 million tonnes, India and the Tatas can do it too. This case also makes it evident that the government is ready to stand behind Indian companies in their efforts.
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