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Vodafone picks up stake in BTVL.
As the country is opening up, we will see numerous companies flooding into India. Why not? India is a huge market, loads of opportunities, increasing number of millionaires and billionaires every year, how can any sensible company ignore such a destination? And guess who becomes the primary target of these companies? It's our very own established Indian companies.
Let us understand what have been the primary reasons for these changes in the organizational structures (through Mergers & Acquisitions). Improve capacity utilization, forward and backward integration, reduced managerial staff, economies of scale, gain access to new suppliers and distributors, gain new technology and tax exemptions are few of them.
Now a question arises that why are these Indian companies acquired? Indian companies are getting acquired because: -
This can be the only way for a foreign company, as the FDI limits in that sector are not fully liberal.
The foreign company can take a stake in Indian company, learn the tricks to do business in India, and then go solo as and when it is permitted by the government to do so.
It also gives the reach to the foreign company as established Indian companies have their (distribution) network (in India).
But this article is not an attempt to discuss that these (Acquisitions of Indian companies) should not happen. But this is an attempt to discuss something greater. Its an attempt to understand why in India some companies are sold to big foreign players while some companies would (probably) never get sold. We can find few instances to exemplify this.
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* Contributed by: -
Manvendra Singh & Nipun Jain,
Class of 2006,
Amity Business School, Noida.
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