Why MNCs are changing their India tune

The reasons are myriad - maturing of markets, change in business strategy -but there is a clear indication that global firms are not willing to tolerate any more slack in India

If you are someone who has watched multinational firms’ India play in the heady days of the 1990s and 2000s, the current goings-on are a big let-down. Back then, for the globetrotting MNCs India was the last El Dorado, to be conquered and won at all cost. Though China, another big consumer market, also beckoned, it was considered “taken”, by either government-led local firms or other MNC peers.

No wonder most played the Indian market much in the PGA Tour's Together Anything’s Possible style, their ambition not constrained by money, men or material. The liberalisation and globalisation-led 90s and noughties was a time when western capital markets were infatuated with a strong emerging market play, and fortunes were made or lost on mere mention of whether the firm was going in or out of India!

Global firms poured money into India as if there was no tomorrow, and often chased losing, thin on strategy ideas and projects that they would have been loath to back in most developed markets. It was clear that there was a huge error in estimating the true size of the addressable Indian market, and some correction in expectations did happen in the 2000s and later, but most kept the faith and the purse strings open.

Something has changed dramatically of late. Though in the past four-five years alone, there have been some flight out of the country by MNCs — such as French retailer Carrefour closing down its cash-and-carry business in 2014 or Japanese drugmaker Daiichi Sankyo exiting India in 2015 — it is not so much a Quit India movement as yet. More like an expectation that India has to start behaving like any other market and stand up on its own and stop depending on the parent’s largesse. The reasons are myriad. For some, it is the global strategy at play, but for most it is India-specific issues like regulatory overhang, underperformance of the market, policy uncertainty or the inability to compete in perhaps of the world’s most complex market.

After pouring over Rs 1 trillion in the last decade or so, British telco Vodafone announced last week that it has finally closed the funding spigot to its gasping Indian subsidiary, and is ready to face... well... even exit from the country if it comes to that. One of the earliest MNC carmakers into India, American Ford Motors has agreed to take a junior role in a partnership with local automaker Mahindra & Mahindra for its struggling operations in India. Why, even General Motors is learned to be looking for buyers for its only remaining factory in India in Pune.
 

Though not as dramatic as a retreat from India, there is clear change of tack among many others across sectors. Time was when American beverages major Coca-Cola was gobbling bottlers in India, and writing down losses it had run up to fuel its aggressive take-markets-at-all-cost strategy. Now, the firm is reportedly hawking those bottling plants to its franchise bottlers in order to generate cash.

Japanese investor SoftBank, after pouring in almost $10 billion in Indian startups, including nine unicorns, is demanding all new funding to be linked to time-bound public exits or the chance to sell stake to any willing buyer. Singed by huge losses run up by its Vision Fund globally due to unprofitable bets on WeWork and Uber, SoftBank, according to venture capital tracing firm Tracxn, has not put even a single dollar in new investment in India this year! And after a bitter separation with its partner for half of the country, McDonald’s has now reportedly put stricter rules for prospective new partners with no leeway to take the operations public and to hypothecate the operating company’s shares to the parent.