Intellectual power of India takes hold in UK
In the first of a week-long series on the new Anglo-Indian business relationship, our correspondent charts the passage from India of increasingly ambitious companies
Ashling O’Connor
The Times
In a drab 1960s office block on the unfashionable Pinner Road in Harrow, North London, a dozen or so lab technicians in white coats are poring over clinical research for Intas Pharmaceuticals.
The $150 million company was set up more than 35 years ago in the western Indian city of Ahmedabad by Hashmukh Chudgar, but it spread its wings into the British market five years ago at the behest of Nimish, Binish and Urmish, the founder’s sons.
Their office is unremarkable, hidden away in a grey world of semidetached mock-Tudor homes, a parade of shops and careworn commuters trooping on and off the Metropolitan Line.
But Intas is not only extraordinary in itself as the largest contract manufacturer by volume of generic drugs to the EU. The Chudgar family business in sprawling suburbia also represents a creeping counter-offensive that promises to transform the British economy: Indian insourcing.
The Anglo-Indian relationship is still so dominated by memories of Empire – the novels of E. M. Forster and Rudyard Kipling, television series such as The Jewel in the Crown, not to mention the cricket – that it is all too easy to see the ties between Britain and India through the prism of the past.
In the first wave of immigration, they came seeking a better life as shopkeepers, traders and restaurateurs. Today Indians are arriving as bankers, scientists, PhD students and software engineers.
Seventy miles from Harrow, to the west of the Fens, India’s biggest software services provider has taken over the old Pearl Assurance call centre on the edge of Peterborough, in an even larger concentration of Indian capital in unexpected quarters. From its “innovation lab”, Tata Consultancy Services (TCS) provides software solutions for a host of blue-chip companies, including British Airways, Virgin Atlantic, National Grid, Welsh Water, United Biscuits, Norwich Union and AXA.
More than a thousand employees, a third of whom are Indian, work on high-end technology projects for clients, including a leading media company that is aiming to rival the dominant digital television provider.
The £5 million facility has 18 British companies in the pipeline and a potential order book value of about £120 million.
Mike Scott, the mathematician who heads the centre, has spent almost his entire career with British Telecom. He is an evangelical convert to the Indian way of doing business and, happily, his old employer is now TCS’s biggest customer. “There is a massive intellectual power in India,” he said. “It is amazing how bright and well trained they are. I saw nothing like it at BT.”
As India bids for superpower status, it is having a transforming effect on the British economy. The singular evidence of this was Tata Steel’s successful £6.7 billion bid for the remnants of British Steel completed this year in a deal that changed all foreign preconceptions of Indian enterprise.
This new view of India’s purchasing power was reinforced a few months later by the £600 million acquisition of Whyte & Mackay, the world’s fourth-largest whisky distiller, by Vijay Mallya’s UB Group.
But these deals tell only part of the story. Below the banner of big headlines, Indian businesses are making inroads in a cross section of industries from healthcare to auto components and software design to film production.
They already own some of the most British of institutions, from steel furnaces in Doncaster to the maker of the Queen’s favourite towels, and are casting their acquisitive eyes over genteel favourites such as Jaguar. Yet the process of Indian inward investment into the UK has only just begun because the Indian outward journey is still in its infancy.
India is the future workforce of the world: half the 1.1 billion population is under the age of 25, and its 14 million-strong pool of young professionals, replenished by 2.5 million graduates a year, is nearly twice the size of both China’s and America’s. By 2025 India will eclipse Germany as the world’s fifth-largest consumer, McKinsey, the consultancy firm, predicts.
India’s invisible hand has been at work in British business for some time, but because of a comfortable bilateral relationship, rooted in the shared – albeit uneven – experience of imperialism, it is only just coming to notice.
Think London, the foreign direct investment agency for the capital, says that India is the second-largest investor by projects after the US. Sixteen per cent of the £52 billion that flows into London each year comes from India, creating 634 jobs from 19 projects last year. These figures are impressive even before you consider that they do not include the Corus and Whyte & Mackay acquisitions. And they are symptomatic of a newly confident and capital-rich India, which has entered the global market seemingly from nowhere.
Before 2000, an Indian company had never made a significant overseas acquisition. However, according to McKinsey, Indian companies bought more than 100 foreign businesses during 2005 for $4.5 billion.
“Once they have taken the decision to move out of India, the world is their next market,” Kevin Gold, managing partner at the London law firm Mischon de Reya, said.
Indian entrepreneurs, freed from the capital constraints of their predecessors, are suddenly taking flight from their domestic markets. London is often their first stop and is increasingly a bridgehead to continental Europe.
“India is generating newfound wealth,” Sunil Dwivedi, head of India at Think London, said. “It wants a world platform and London is the natural choice because of historical and language connections. We have seen this coming for at least three years.”
This year India’s total outbound M&A investment may exceed the $30 billion target for inbound investment, according to Ernst & Young and the Federation of Indian Chambers of Commerce and Industry. Investment by Indian companies into the UK has already eclipsed investment into India by British companies.
“There is an amazing reversal in the tides of capital flows,” Naina Lal Kidwai, HSBC India chief executive and the first Indian woman to graduate from Harvard Business School, said. “You don’t see a Corus happening every day, but the trend continues. Indian companies see London as a gateway to Europe.” Small to medium-sized businesses represent the fastest-growing sector, particularly in private wealth management, retail banking and reinsurance. There are more than 10,000 Indian-owned businesses in London, employing 49,000 people. “If the Tatas can do it, smaller companies think they can do it, too,” said Anita Nandi, head of the City of London’s India office, which opened in Bombay in May to foster bilateral trade and investment.
“Five years ago, they wouldn’t even have thought of getting out of their rural markets,” she said. “Technology means you can be sitting in a village in Madhya Pradesh but still doing business in London.” In pockets around Britain, thousands of Indian companies are quietly thriving in an amenable corporate environment where language and law are all terribly familiar.
“The UK values people who come to live in Britain on the work they do and not their colour,” said Lord Paul, the Indian-born industrialist who is one of Britain’s richest men 40 years after he settled in London. “Any immigrant feels comfortable here, and Britain has gained because of its openness.”
Behind the complaints about white-collar jobs lost to sweat shops on the sub-continent, Indian companies are making a significant contribution to the Government’s coffers and advances in science and education.
TCS already generates about $800 million of its $4 billion global turnover from the UK, where it is reporting year-on-year revenue growth of 45 per cent. Employing 4,000 people in the UK, its economic impact is tangible. The idea that it is draining money from the British economy is outdated.
Much like the East India Company believed that it would have a civilising impact on India, Indian companies believe that they can import a superior technical knowledge to make Britain a more efficient place.
“In the narrow context, people see the offshoring. They do not see the full impact of our investment – the tax we pay, the academic institutions we support,” A. S. Lakshmi, TCS’s UK head, said. “But I think all the major political parties recognise we bring competitiveness to British companies. We help them become nimbler and open their eyes to new opportunities.”
The empire is striking back, but the process of reverse colonialism is just getting started in the remaking of corporate Britain.
Indian firms doing business in Britain
Tata (steel, IT, hotels, tea)
Wockhardt (healthcare)
UB Group (spirits)
ICICI (financial services)
Bharat Forge (auto components)
HCL (outsourcing)
Ranbaxy (pharmaceuticals)
Apeejay Surrendra (tea)
Monocon (refractories)
Cognizant (IT)
UTV (film)
Godrej (consumer goods)
Kotak Mahindra (broking)
Reliance (life sciences, telecoms)
Onwards, upwards
— India is the second-fastest-growing economy after China. GDP growth in first quarter was 9.1 per cent. Full-year growth is expected to be at its strongest in 20 years
— India has 36 dollar billionaires and 83,000 dollar millionaires. It also has more than 200 million people who survive on less than a dollar a day
— Bombay’s unofficial population is 20 million. It is forecast to eclipse Tokyo as the world’s most-populous city by 2020
—
Per capita income in India will rise 26 per cent, from $831 to $1,021, this fiscal year, moving it into the category of lower- middle-income countries, as designated by the World Bank
— The UK is India’s fourth-largest trading partner behind the US, China and Belgium
— India represents 16 per cent of the flow of foreign direct investment into London
— There are 1.3 million people of Indian origin in Britain; 437,000 live in London. The capital is home to 173,000 Indian citizens
— There are 160 multinational Indian companies in London. More than 10,000 Indian-owned businesses in the capital generated a combined turnover of $14.4 billion, or 5 per cent of the city's economy. India is the second-largest foreign creator of jobs in the UK, after the US
