The Hindu Business Line : MNCs bet big on India operations

If multinationals are sharpening focus on their India operations, it is not without reason. Indian subsidiaries of these MNCs have outshone their parent companies in recent times in terms of financial performance and are accounting for a greater proportion of global revenues.

The trend is not restricted to the IT sector, but is visible across auto, pharma, consumer durables and FMCG as well. In fact, FMCG giant Unilever recently stated that it sees its Indian subsidiary, Hindustan Lever Ltd (HLL), as a growth driver for the company. In the January-March 2006 quarter, while sales of HLL grew 11.6 per cent, Unilever's revenues increased by 8.6 per cent.

Similarly, in the same period, even as sales of German company Siemens grew by 14 per cent, sales of its Indian subsidiary jumped by 56 per cent. Engineering company ABB saw its sales grow by 2.5 per cent in the quarter, while its Indian subsidiary grew by 32 per cent. FMCG major Colgate too saw its worldwide sales rise by 4.5 per cent, even as its subsidiary in India recorded 26 per cent. According to analysts, Indian subsidiaries of numerous MNCs have been earning margins much higher than their parents with estimates that about 75-80 per cent of foreign companies in India are profitable.

An Indo-German Chamber of Commerce study shows that the Indian subsidiaries of a majority of German multinationals have outperformed the parent companies. The bullishness is all the more visible in the IT sector where the India operations have turned out to be profit spinners owing to low-cost, skilled professionals. Little wonder IBM recently announced plans to triple its investments in India to $6 billion in the next three years.

Global auto majors too see India as a volume spinner. While Suzuki plans to put its second Indian plant in operation by the end of this year, Nissan is to commence vehicle manufacturing here and Toyota is slated to put up a new plant in India next year.

It comes as no surprise then that a large number of firms have consolidated shareholding in their Indian subsidiaries during the last fiscal.

Pfizer and Glaxo are among the global pharma majors that have raised their stake in their Indian subsidiary. Merrill Lynch has also acquired controlling stake in DSP Merrill Lynch.

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