An Indian Approach to Global M&A:
An interview with the CFO of Tata Steel
Koushik Chatterjee discusses the Indian multinational’s approach to outbound M&A—and its response to the global financial crisis.
by Richard Dobbs and Rajat Gupta
Long a major force in India, the Tata Group is quickly establishing a global presence. With a combined market capitalization of more than $32 billion and operations in every major international market, Tata owns companies in businesses as diverse as consumer products, energy, engineering, information systems, communications, services, and materials.
The group’s largest business, Tata Steel, was established in India in 1907 and retains its headquarters in Mumbai. In recent years, the company has expanded both within Asia (by acquiring Thailand’s Millennium Steel, now called Tata Steel Thailand, and Singapore’s NatSteel Asia) and outside it (through the 2007 acquisition of the UK company Corus, as well as a host of smaller acquisitions, joint ventures, and associations). These now place Tata among the world’s top ten steel manufacturers, and one with a unique perspective on integrating new acquisitions. According to the group CFO of Tata Steel, Koushik Chatterjee, it sends only a few people, not planeloads of employees, to do the job—an aspect of what he describes as a sincere effort to create a partnership that jointly develops a vision for the combined company.
Recently, Chatterjee discussed this approach with McKinsey directors Richard Dobbs and Rajat Gupta. During the conversation, he explained the impetus behind the group’s acquisitions abroad, the effects of the global financial crisis on the steel industry and Tata Steel, and the company’s efforts to improve the efficiency of its operations. The crisis, Chatterjee notes, makes opportunities more apparent—and restructuring more critical for the company’s long-term health.
The Quarterly: Last year was the first in which Asian and Indian companies acquired more businesses outside of Asia than European or US multinationals acquired within it. What’s behind the Tata Group’s move to go global?
Koushik Chatterjee: India is clearly a very large country with a significant population and a big market, and the Tata Group’s companies in a number of sectors have a pretty significant market share. India remains the main base for future growth for Tata Steel Group, and we have substantial investment plans in India, which are currently being pursued. But meeting our growth goals through organic means in India, unfortunately, is not the fastest approach, especially for large capital projects, due to significant delays on various fronts. Nor are there many opportunities for growth through acquisitions in India, particularly in sectors like steel, where the value to be captured is limited—for example, in terms of technology, product profiles, the product mix, and good management. India actually needs a faster pace of increased organic capacity in steel in the near future to meet its growing demand.