Tatas sign deal to buy Daewoo unit for $102 mn

With the latest acquisition, the Tatas can launch Daewoo trucks and buses in other countries. The price includes the perpetual and exclusive right to use Daewoo trademarks in Korea and overseas markets for the product range of the Daewoo unit. “This is indeed a major step for Tata Motors and a milestone for the Group in its quest for globalisation. I am confident that both companies will derive considerable benefits from this agreement,” Ratan Tata, chairman of Tata Sons, said after the group signed the deal in Seoul on Wednesday.

DWCV is Korea’s second largest heavy truck maker with a modern plant in Kunsan that has an annual production capacity of 20,000 medium and heavy vehicles. The Tatas were not alone in the overseas gamble. The Rs 70,000-crore plus Reliance group, the largest private sector group in India, acquired Flag Telecom for $211 million recently. Flag has now announced a major undersea cable project which would create a massive submarine link for the company from Hong Kong in the east to Egypt in the West.

Many other industrial groups were shopping abroad to buy companies. Bharat Forge owned by the Kalyani group of Pune recently acquired CDP of Germany of around Rs 153 crore. South-based Sundaram Fasteners is acquiring Dana Spicer of the UK. The Aditya Birla group, now run by Kumar Managlam Birla, bought a host of companies in India like Indian Aluminium. The group recently bought Nifty Copper Mines in Australia.

Why are Indian business groups turning aggressive these days? Many of the top business houses like Reliance, the Tatas, the Bajajs, ITC, the Munjals and the Strelite group are sitting on huge cash reserves. “Corporate performance is improving year after year. This year there’s a 40 per cent rise in net profit of listed companies,” said Mayur Mehta, a Mumbai-based fund manager.

Moreover, the government and the Reserve Bank of India have liberalised the foreign exchange remittance norms. Now Indian companies spend even 100 per cent of its net worth in project investments abroad. This means if a company like ONGC which has a net worth of Rs 35,600 crore, can invest this amount abroad.