Posted by: John Elliott | May 25, 2009

India’s Bouncing Tycoons – Sunil Mittal back in Africa, Ranbaxy’s Singh loses to Japan

It is of course a coincidence, but the pace of corporate news in India is accelerating while the new government, whose election last week sparked a surge of corporate optimism and a stock market boom, dithers over which ministers to appoint to which jobs.

In the news this morning are two family businessmen, both market leaders, who have wanted to internationalise their businesses – Sunil Mittal, founder chairman of Bharti Airtel, and Malvinder Singh, who inherited his chairman’s and ceo’s position at the top of Ranbaxy Laboratories.

 Sunil Mittal - a Forbes photo

Sunil Mittal - a Forbes photo

One now looks like succeeding, while the other appears to have failed

A year ago Mittal started audacious merger talks with MTN, a leading South Africa telecom company, but was ousted by Anil Ambani, whose Reliance-ADAG empire includes Reliance Communications. Ambani’s bid was then mischievously foiled by his estranged brother, Mukesh Ambani of RIL, who claimed prior rights to Reliance Communication’s shares in any deal.

Also a year ago Singh amazed India’s corporate world by selling control of Ranbaxy, which his family founded in 1961, to Daiichi Sankyo of Japan for around $2bn, while staying in charge as chairman and ceo.

Now the fortunes of these two men have been reversed:

-  Mittal, who already runs the world’s third biggest mobile phone business, is back today with a bid for a new deal that could eventually [italic inserts here and below added May 26 to indicate a merger is not the initial aim] give him control of MTN and the potential to become internationally significant.

-  Singh and his brother yesterday left the Ranbaxy board along with two other executives in what looks like a Daiichi coup.

 Malvinder Singh - a BusinessWorld photo

Malvinder Singh - a BusinessWorld photo

Singh’s apparent ouster is a sad end for the family’s links with Ranbaxy, which has spearheaded the Indian pharmaceutical industry’s international growth. However, he has other interests – in Fortis healthcare and hospitals, and Religare financial services. He remained chairman, ceo and md when Daiichi bought control, but the share price has slipped by over 60% since then ands a $150m loss is forecast for the year.

More significantly, there are continuing US drug regulatory problems with over 30 Ranbaxy products, and it looks as if the Japanese, after watching from the sidelines, decided to signal to the US that Daiichi has taken charge.

Yesterday’s changes, with an Indian executive promoted to ceo and a Japanese Daiichi executive coming in as chairman, were billed as “amicable” – but Singh, who was to have held the jobs until 2013, did not appear at the announcement press conference.

It has never been clear how seriously, nor for how long, Singh wanted to straddle the two potentially ill-fitting roles of being a hired top executive in a Japanese group, and a healthcare and financial services entrepreneur, but clearly the mix didn’t gel.

Mittal is much more sure of what he wants to do. Having batted successfully for years against the powerful Ambani brothers, he has made Bharti the undisputed market leader, and the world’s third largest mobile services operator – it announced 100m customers ten days ago. He has said he now wants to expand globally, and clearly his Bharti Enterprises group is primarily eyeing the world’s next big telecoms growth area of Africa.

Like Singh, he is willing to sell some of the Bharti stake to achieve his ambitions, but he will not cede India-based control. Last year’s talks eventually foundered on MTN’s plan to base the merged group in South Africa, which Mittal would not accept, even though it looked as though he would have been in control.

Now he plans to acquire a 49% $4bn stake in MTN which, along with its shareholders, would get 36% in Bharti for $2.9bn. The initial result of this cash and shares deal would be what the companies call “a partnership….to create an emerging market powerhouse”, with revenues of over $200bn.  That would give Bharti “participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN”. A full merger, presumably Delhi-based,  would be a “broader strategic objective” for later.

A year ago Mittal seemed not to have ring-fenced his MTN talks well enough, nor fully mastered the intricacies of South Africa’s politics and focus on black economic empowerment. That left a gap that allowed Anil Ambani to burst in.

Mittal’s pride was hurt – he had just ended a year as president of the CII, a leading Indian business federation, and had won many top businessmen awards. He was also facing delays building up a retail and wholesale store business in India with Wal-Mart (which would have been opening its first wholesale outlet today in his home state of Punjab, were it not for widespread religious riots in the state).

Yesterday’s announcement cautioned that talks were at an early stage and might not lead to a deal, let alone a full merger, but Mittal has presumably organised his pieces better on the South African chessboard. 

He has secured exclusive talks until July 31 to seal a deal, which would have to clear various regulatory hurdles. These include India’s foreign direct investment (FDI) regulations that the last government controversially eased just before the general election, though both finance ministry and Reserve Bank of India officials later filed objections.

The MTN deal would be fine under those changes which, despite the officials’ objections,  look like being maintained by the new government under Pranab Mukherjee as finance minister.

An earlier version of this post is on www.ft.com/world/asiapacific/india

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