Great Indian Businesses?

A lot has been said and written about the Indian businesses - how they were growing at a scorching pace, how they were making global acquisitions, etc. However, for all the hype surrounding the Indian businesses, the fact still remains that they had a plethora of factors going for them until some time ago:
- Huge liquidity in the global financial system
- Increasing Foreign Direct Investment (FDI) in India
- Booming economy
- Prevalence of the decoupling theory

Now with most of these factors gone or reversed, the Indian businesses leaders and their business models are being severely tested:
Tata Motors: The acquisition of a luxury brand like Jaguar while the global economy was facing a threat of recession was a questionable move. On top of that, the acquisition was done by borrowing a lot of money. The stock-holders of Tata Motors have paid a heavy price for that mistake. There are talks Jaguar and Land Rower now being bailed out by the UK government.
DLF: That the DLF stock tanked was not a surprise. However, the move on part of DLF to buy back shares definitely was. The company was losing cash on its core operations. The company was sustaining its operations though IPO money raised a year ago, fresh borrowing, and raising capital by selling equity in various special purpose vehicles. This made a strong case for cash conservation. However, the DLF management it seems was more interested in making sure that their share price remained high – and was not too worried that their operations were in a bad shape. The buy-back done with the sole intention to raise the share price was an ill timed and unwise move.
Reliance Power: The Reliance Power IPO marked the zenith of business optimism and absurd valuations. No surprise that with the economy going downhill, the stock went substantially below its IPO price.
Satyam: As if the failed Maytas acquisition was not bad enough, the financial fraud by Raju has now severely exposed the vulnerability of Indian businesses in this downturn!

To be fair, over the last two decades India has produced some very good businesses, a case in point being Bharti (Airtel) which has been a very innovative business generating tremendous value for its shareholders. However the sad fact remains that like the Indian stock market, the Indian businesses also benefited a lot by the tremendous liquidity of the past few years. The great investor Warren Buffet once stated, "Only when the tide goes out do you discover whose been swimming naked". Now that conditions have become much more challenging globally, we will find out which Indian businesses have good sustainable business models.




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This post presents a point of view which differs from conventional wisdom. Apart from being a good read (hopefully), it can be a good starting point to help readers, preparing for CAT (IIM) or other MBA interviews, think differently. Since the data / facts for these posts are derived from a host of sources and websites, readers are advised to cross-check the authenticity before using them anywhere.