Friday, February 02, 2007

winners curse.. or is it???

The Tata’s finally acquired Corus in the biggest acquisition by an Indian firm ever. The company stock however took a nosedive with the general consensus being that the company overpaid and thus would now have to bear the “Winners Curse”. The final price of 608p is much higher then the initial bid of 455p and this by all accounts appears an audacious price to pay for a company barely profitable. However here lies the catch, Tata groups overseas acquisition strategy is based upon the acquiring underperforming assets and then turning them around , they have successfully demonstrated their operational capabilities in the past by turning around Tetley, Nat steel etc to name a few. Moreover although the group officials deny it this deal was much more then a mare overseas acquisition for the Tata’s, consider this :
· Tata Steel is now the fifth largest producer of steel globally
· Tata group is the largest industrial group in India in terms of revenues, ahead of Reliance.
· The group has effectively shed the tag of being very conservative

The Corus deal has also fundamentally changed the steel industry by giving a major boost to the consolidation wave. With the consolidation process now on a roll the steel companies might be in for a fundamental re rating.

I for one remain confident of the long term benefits of this deal for the shareholders as Mr Tata says-“corporations live much longer…” , it’s a masterstroke from arguably the wisest businessman in India today. Don’t forget that he gave India its first home made car (the Indica) when very few gave him a chance... As he said in one of the interviews “I am a risk taker, not a gambler.” This may go down in history as his best moves or may be it won’t but one thing is certain it would certainly be registered in history amongst the most bold moves by India inc..

1 Comments:

At 11:18 AM, Anonymous Anonymous said...

Hi Samir
You have an interesting blog ...good to read for MBA aspirants like me ..
Can you tell me what are chances of getting into ISB with a score of 690 , based on your exp thr ?

 

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