Sucheta Dalal :India Inc: old order yields place to the new
Sucheta Dalal

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India Inc: old order yields place to the new  

Oct 2, 2006

A zooming Sensex, a confident corporate sector and some global success stories—that is what Dr Manmohan Singh will see when he comes visiting next week to inaugurate the capital market watchdog’s new lair. What a difference from the insecure days of 1992 when the Bombay Club of industrialists got together to protest against Dr Singh’s economic liberalisation and successfully persuaded the Congress to eschew reforms in favour of mindless populism.


This time around, although the Congress’s rhetoric remains populist and its economic reforms erratic (disinvestment, insurance and banking) and confused (SEZ controversy), it is still basking in the world’s interest in our vast market potential and economic growth. That’s because government policies may be indecisive, but corporate India is surging ahead with enviable confidence at all levels. Interestingly, the companies and business leaders who are leading India’s transformation and giving sheen to its image are changing all the time. First, it was Infosys, Wipro, iFlex, Biocon and Glenmark that raised the bar on global competitiveness, governance practices and rewarding shareholders; now a new lot including MCX, and seem set to join their ranks.


Many vociferous members of the Bombay Club and even some who were not are now a spent force. For instance, the Thapars, Singhanias, Chhabrias, Modis or the Vinay Rai group are a shadow now. The steel groups—the Jindals, Mittals (Indian faction), Essar, were creatures of economic liberalisation that went on an unmanageable fund-raising and growth spree. The commodity boom has allowed them to redeem themselves (except the Mittals), but their reputations will take some time to mend.


Some opportunistic promoters who thought Harshad Mehta’s manipulations would lead them to quick prosperity took a hard knock in the late 1990s along with Harshad. They have made a remarkable recovery. Videocon is steadily forging international linkages, Bharti Tele (the family had a Harshad connection, not the company) has grown to be a dominant services company and Sterlite has hit the global scene by listing Vedanta Resources on the London Stock Exchange (but still attracts a fair share of enemies).


If the pecking order of the most influential companies has changed, so have corporate rivalries and alignments


Among the manufacturing biggies, Bajaj Auto found new direction by trusting the next generation, while Baba Kalyani of Bharat Forge shrugged off his dependence on India’s manufacturing sector to become the world leader in forgings with a global business empire. The Ambanis were never a part of the Bombay Club, so the Reliance juggernaut is now steaming ahead on twin wheels, despite a vicious and controversial break up. Meanwhile, the multinationals (MNCs) have lost much of their glow as aggressive, unlisted Indian companies coming out of nowhere are giving them a run for their money in cosmetics, oils, soap, detergents, ice-cream, biscuits and even fast-food. Many of these are regional players who have successfully fragmented the nationwide MNC markets and are able to offer equally good if not better products at lower prices due to lower overheads.


If the pecking order of the best, biggest or the most influential companies has changed, so have corporate rivalries and alignments. The war between the Ambanis and Essar has gone cold and that between the Ambanis and Wadias is all but forgotten. At the same time, there are signals of new wars and friendships.


LN Mittal, the world’s biggest steel magnate, is known as much for his devastatingly successful acquisitions as his flashy spending. Having given the jitters to several international companies, he now seems set to ruffle India’s corporate empires. As part of a jury to decide business awards, Mittal apparently stirred things up by objecting to Mukesh Ambani’s selection on the grounds of questionable governance practices. Sources say that he backed down after the Hindustan Lever chairman argued that corporate governance practices should be a yardstick for judging companies and not to measure individual achievement.


Corporate watchers opine that Mittal’s opposition had more to do with issues regarding his planned foray into oil exploration than mere business ethics. If this seems likely to mark the beginning of a powerful new rivalry, then the grapevine also sees signals of a blossoming friendship between Reliance and the Tata group. Only time will tell how things will eventually pan out.


-- Sucheta Dalal