Going Global? Study Tata Steel First

Tata Steel is among a number of Indian firms selling foreign assets to repay debt or discontinue less profitable ventures, and the trends may signal India’s troubles with globalization, suggests Rajrishi Singhal. “Economic reforms and competitive pressures forced many Indian companies to expand operations overseas through acquisitions with either (or a combination) of three objectives in mind – to acquire competitive supply chains, to access consumer markets, to buy into developed technology and intellectual property,” he writes for Gateway House of the Indian Council on Global Relations. Tata’s purchase of the Corus Group with borrowed funds in 2007 in part involved poor timing, taking place a few months before the global financial crisis, and afterward, Singhal noted, “A bloated appetite for foreign currency loans was fuelled by historically low interest rates in developed markets.” Depreciation of the rupee added pressure to making loan payments, as well as competing with competitive Chinese steel exports. Before borrowing to expand into global markets, corporations must assess geopolitical and long-term risks and not simply accept advice from international bankers. – YaleGlobal