Gone for a Pound!

Between 2004 and 2008, business leaders in India and around the world were in the grip of unbridled optimism. After two years of lacklustre growth in global GDP, economies around the world had started looking up by end of 2003. By the end of 2004, the trend had become quite pronounced. The Chinese economy was galloping ahead, but other countries were also doing rather well. The US economy was doing well as was most of Europe. Cheap and easy liquidity had boosted a range of sectors in all countries - realty, construction, infrastructure, shipping.... India, Brazil and Russia were growing extremely fast as well. Commodity prices were shooting up as insatiable demand from China for steel, oil, gas, aluminium and coal meant that producers around the world could not keep up with demand.

I remember talking to one big steel producer in India, who told me that he was spending much of his time trotting around the globe to pick up iron ore and coal mines. In another conversation at around the same period, an infrastructure major told me that his biggest preoccupation was to expand and bid for every project that was being put in airports, roads, power, etc., so that he did not lose out on the opportunity. I had asked him if he thought he was expanding too fast, and his answer was that he was actually moving too slow compared to many of his peers.

Merger and acquisition activity had taken off, and so had capacity building at the greenfield level. Domestic business groups that had reached a certain size were scouring overseas for assets they could pick up to become truly global players. No one was perhaps more ambitious in its overseas play in this period than the Tata Group. The venerable Tata Group had often been accused by critics of being too slow and too conservative and missing too many new business opportunities. Between 2004 and 2008, no one could accuse then Chairman Ratan Tata of that, though. He was on a global acquisition spree picking up beverage companies, coal mines, global luxury car firms, and steel assets around the world. Ratan Tata made a number of headline-grabbing purchases, but perhaps none was as big and ambitious as his purchase of Corus for $12 billion in a bidding war with Brazilian rival CSN.

Even now, the Corus buy is possibly the biggest single global acquisition done by any Indian company.

However, Corus turned out to be a nightmare for the Tatas since the day it was bought. Unlike Jaguar Land Rover, which was one of the big successful acquisitions by the group, the steel assets in the UK sucked up tonnes of cash while piling up losses. In the nine years since its acquisition, the Tatas could make the UK steel operations post a minor profit only for one year.

Now the Tatas are pulling the plug on Tata Steel UK, as it is now called. It has already sold one big chunk to Greybull Capital for the princely sum of 1 along with Greybull agreeing to take on some liabilities of that business. It is now looking for buyers for the rest of the Tata Steel UK assets.

How did the biggest acquisition by the Tata Group turn so horribly wrong? Senior Editor Nevin John gives a blow by blow account in our cover story this issue.

It also contains a number of interesting stories in a wide range of areas. Don't miss the story on how Aadhaar-based payment is becoming a big stumbling block in the NREGA scheme (page 46) and also the rise of the delivery boys, a direct result of the boom in e-commerce (page 68).