The last few days have seen two big-ticket overseas acquisition announcements by Indian companies. The first is the Aditya Birla Group-promoted Hindalco’s purchase of American aluminium rolled products maker Aleris Corporation for $2.6 billion, while the second is the Shroff family-controlled UPL Ltd’s $ 4.2 billion buyout of the North Carolina-based agrochemicals major, Arysta LifeScience. The Aleris acquisition is being done by Novelis, the world’s largest aluminium beverage can sheet producer and recycler, taken over by Hindalco in 2007. With Aleris, Hindalco will become a truly value-added aluminium player, as against just a primary metal supplier. The Arysta deal could, likewise, make UPL the fifth biggest global crop protection chemical company after Bayer-Monsanto, Syngenta, BASF and Dow-DuPont.
The above acquisitions are significant from the concerned companies’ standpoint. To the extent the strengthened global footprint from these leads to increased sourcing from their Indian manufacturing facilities, there would be some domestic spinoffs as well. But from an overall Indian perspective, they basically represent outward foreign direct investment. It is good that Indian corporates are emboldened to make big investments. But what the country really needs today is more investment within the country, whether by domestic or foreign companies. Walmart snapping up Flipkart for $ 16 billion, Kia Motors investing in a greenfield car plant at Andhra Pradesh and Samsung opening the world’s biggest mobile phone factory are all welcome news. But they still don’t quite measure up to PM Narendra Modi’s ‘Make in India’ promise.
The Indian economy is today at a crossroads. The ghosts of demonetisation and GST have been laid to rest, even as the new indirect tax regime has settled down enough to prompt a rationalisation of rates. The “micros”, as far as debt-equity or interest coverage ratios of corporates go, have also improved for many to consider resuming investments. But there are two things that are restraining them now. The first is political uncertainty, which may go up in the run-up to next year’s national elections. The second is the not-so-great “macros” — global crude prices, rupee, interest rates and fiscal deficits. Adherence to fiscal discipline is what India really needs — and which can make a huge difference to investor perception, more so in an uncertain global environment.
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