Nearly 11 years ago, in May 2013, Unilever announced the buyback of a 22.5% stake in Hindustan Unilever at a hefty 20% premium to the last traded price, resulting in an inflow of $5.4 billion. There were several other buyback offers around the same time—the fact that many multinational companies (MNCs) bought back shares to try and raise their ownership level to 75% signalled their confidence in the large and lucrative Indian market. Of late, however, there have been several instances of MNCs quitting India or scaling down their stake in their India subsidiaries. Last week, Novartis AG, the Swiss pharmaceutical company, said that it has begun a strategic review that will include an “assessment” of its 70.68% stake in Novartis India. Exactly three months ago, Astra Geneca announced it was exiting India as part of a global strategic review.
The biggest of such exits was the Holcim group’s sale of ACC and Ambuja Cement to the Adani group for $6.4 billion in September, 2022. Given India’s very promising growth story, it was surprising that Holcim wanted to exit, even though the official reason the group gave was its keenness to lower its carbon footprint. The exits from what is arguably the world’s fastest-growing market suggests not every global corporation is necessarily enticed by the Indian opportunity. While consumer-oriented MNCs in India have done exceptionally well as have those in the engineering and automobile spaces, the list of casualties is not small. Many telecom ventures were compelled to shut shop due to an unreliable regulatory environment. So, while a Maruti has been a roaring success, Vodafone, which has invested billions, is in bad shape. Again, CarreFour decided to wind down its operations after a short stint though some of that was due to its own internal problems. Many other pharma giants such as Pfizer, Sanofi, and GSK have either trimmed manpower or trimmed operations in core functions.
Some of the exits or downscaling are for internal reasons. For example, one can appreciate that Citigroup sold off its retail portfolio in India as part of a larger global re-organisation aimed at making the operations simpler. It is also entirely possible that some, like Whirlpool, which has brought down its stake from 75% to 51%, or a Thomas Cook which has pared its stake to 64% from 72%, are trimming their ownership as they want the stock to become more liquid. That is good news for local investors. If some are offering more floating stock, that helps minority shareholders.
Also Read
Private 5G: India lags behind
Welfare vs prudence
Evaluating Mintzberg’s 10 schools of thoughts for strategy formulation
Setting India on the innovation journey However, one hopes these stake sales are not aimed at driving up the share price before a total exit. At a time when India is looking to attract foreign direct investments (FDI), the environment must be conducive. The fact is FDI in India has fallen over the past year even though the bullishness on the country’s prospects has increased. Net foreign investment in the year through September fell to $13 billion, calculations from HSBC Holdings showed, from $38 billion in the same period a year earlier. The PLI (performance linked incentive) scheme has attracted players like Apple, which is encouraging. But global corporations should be enabled to operate big businesses in the country, across sectors, in a stable regulatory environment. Importantly, the playing field should be level. Else, India may not be able to attract enough growth capital.
Nearly 11 years ago, in May 2013, Unilever announced the buyback of a 22.5% stake in Hindustan Unilever at a hefty 20% premium to the last traded price, resulting in an inflow of $5.4 billion. There were several other buyback offers around the same time—the fact that many multinational companies (MNCs) bought back shares to try and raise their ownership level to 75% signalled their confidence in the large and lucrative Indian market. Of late, however, there have been several instances of MNCs quitting India or scaling down their stake in their India subsidiaries. Last week, Novartis AG, the Swiss pharmaceutical company, said that it has begun a strategic review that will include an “assessment” of its 70.68% stake in Novartis India. Exactly three months ago, Astra Geneca announced it was exiting India as part of a global strategic review.
The biggest of such exits was the Holcim group’s sale of ACC and Ambuja Cement to the Adani group for $6.4 billion in September, 2022. Given India’s very promising growth story, it was surprising that Holcim wanted to exit, even though the official reason the group gave was its keenness to lower its carbon footprint. The exits from what is arguably the world’s fastest-growing market suggests not every global corporation is necessarily enticed by the Indian opportunity. While consumer-oriented MNCs in India have done exceptionally well as have those in the engineering and automobile spaces, the list of casualties is not small. Many telecom ventures were compelled to shut shop due to an unreliable regulatory environment. So, while a Maruti has been a roaring success, Vodafone, which has invested billions, is in bad shape. Again, CarreFour decided to wind down its operations after a short stint though some of that was due to its own internal problems. Many other pharma giants such as Pfizer, Sanofi, and GSK have either trimmed manpower or trimmed operations in core functions.
Some of the exits or downscaling are for internal reasons. For example, one can appreciate that Citigroup sold off its retail portfolio in India as part of a larger global re-organisation aimed at making the operations simpler. It is also entirely possible that some, like Whirlpool, which has brought down its stake from 75% to 51%, or a Thomas Cook which has pared its stake to 64% from 72%, are trimming their ownership as they want the stock to become more liquid. That is good news for local investors. If some are offering more floating stock, that helps minority shareholders.
However, one hopes these stake sales are not aimed at driving up the share price before a total exit. At a time when India is looking to attract foreign direct investments (FDI), the environment must be conducive. The fact is FDI in India has fallen over the past year even though the bullishness on the country’s prospects has increased. Net foreign investment in the year through September fell to $13 billion, calculations from HSBC Holdings showed, from $38 billion in the same period a year earlier. The PLI (performance linked incentive) scheme has attracted players like Apple, which is encouraging. But global corporations should be enabled to operate big businesses in the country, across sectors, in a stable regulatory environment. Importantly, the playing field should be level. Else, India may not be able to attract enough growth capital.
Get live Share Market updates, Stock Market Quotes, and the latest India News and business news on Financial Express. Download the Financial Express App for the latest finance news.
Reduce the exits
21
14
25.02.2024
Nearly 11 years ago, in May 2013, Unilever announced the buyback of a 22.5% stake in Hindustan Unilever at a hefty 20% premium to the last traded price, resulting in an inflow of $5.4 billion. There were several other buyback offers around the same time—the fact that many multinational companies (MNCs) bought back shares to try and raise their ownership level to 75% signalled their confidence in the large and lucrative Indian market. Of late, however, there have been several instances of MNCs quitting India or scaling down their stake in their India subsidiaries. Last week, Novartis AG, the Swiss pharmaceutical company, said that it has begun a strategic review that will include an “assessment” of its 70.68% stake in Novartis India. Exactly three months ago, Astra Geneca announced it was exiting India as part of a global strategic review.
The biggest of such exits was the Holcim group’s sale of ACC and Ambuja Cement to the Adani group for $6.4 billion in September, 2022. Given India’s very promising growth story, it was surprising that Holcim wanted to exit, even though the official reason the group gave was its keenness to lower its carbon footprint. The exits from what is arguably the world’s fastest-growing market suggests not every global corporation is necessarily enticed by the Indian opportunity. While consumer-oriented MNCs in India have done exceptionally well as have those in the engineering and automobile spaces, the list of casualties is not small. Many telecom ventures were compelled to shut shop due to an unreliable regulatory environment. So, while a Maruti has been a roaring success, Vodafone, which has invested billions, is in bad shape. Again, CarreFour decided to wind down its operations after a short stint though some of that was due to its own internal........
© The Financial Express
visit website
login
who are we?
contact us
qosheapp
Toi Staff
Gideon Levy
Belen Fernandez
Rami G Khouri
Mort Laitner
Ali Fathollah-Nejad
Nikkei Editorial
