Volume 7, No. 2, February. 2006

- Arvind

In the October 05 issue of the magazine we saw the speed at which Indian industry was being taken over, directly and indirectly, by foreign capital. We add to this now the latest figures on the same topic.

According to the Business Standard (Dec.21 2005) imperialists now (on Sept 30 2005) OWN 30% of Indian companies and as much as 39% of the private sector. They own 11% of Public Sector Units (including banks). They control 32% of the Bombay Stock exchange. According to this Business Standard report as on Sept 30th, of the 2,457 companies studied, foreign holdings in 164 companies are now over 50%, 180 companies have between 25% and 50%, 334 have between 10% and 25% and 240 have between 5-10% foreign holdings. These foreign investments include FDI, FII, NRI deposits and American (and other) Depository Receipts.

Since then FII penetration has been going up even further at a very fast pace. On Sept 30th they controlled Rs.6½ lakh crores of shares on the BSE; in these past three months alone this has gone up by Rs.11,263 crores. Also FDI’s have been going up fast with the current year having the largest number of mergers and acquisitions — many of which are foreign takeovers of Indian companies.

In December 2005 the US’s big investment banker, Merrill Lynch, bought out their Indian partner in the Indian joint venture for a gigantic sum of $500 million. It is the largest FDI in India’s financial service sector. In 1975 Hemendra Kothari began the company DSP Financial Consultants. Later the joint venture DSP Merrill Lynch was formed with the US partner having a stake of 40%. Now Merrill Lynch has increased its stake to 90% buying out the 47% of Hemendra Kothari’s share as also 3% from the public.

With this takeover, the total takeovers in the first 11 months of this year have reached a gigantic $13 billion. The largest takeover in the year was of Ambujam Cement India Ltd by the Swiss company Holcim Ltd for $810 million. Such takeovers have been a continuous trend in this period of globalization, but have seen a spurt in the last two years. Most of these multinationals are buying out their Indian partners, with the further opening up of the laws of the country, raising their stake to 90% and above, and delisting from the stock exchange. During the last few years dozens of MNCs have made open offers and chose to de-list. These include Cadbury India, Phillips India, Reckitt Benckiser, Carrier Aircon, etc. And in many cases where the Indian partner was not agreeable to a sell-out they have used their influence with the government to set up wholly owned subsidies. An example of this was that Singer India got FIPB permission to set up a wholly-owned subsidy allowing its collaboration with the Poddar group to languish.

Also in November last year Mahinder and Mahinder went into a 51:49 partnership with the giant US company, International Truck and Engine Corporation.

As mentioned in the October article such direct acquisitions are one method for the foreign take-over of the country’s business. The other method is through the indirect path of FII investments where foreign institutional investment firms buy up the share capital of companies on the stock exchange. Over $34 billion has entered this way and the pace of its entry is increasing by leaps and bounds. The sky rocketing of the stock exchange, primarily due to FII inflows is an indication of the extent to which the money is flowing in.

According to the Economic Times (July 25 2005) there are 13 companies in India where the FII investment is $1 billion and above. Leading the pack is Infosys with $5.5 billion foreign investment, followed by Reliance with $4.9 billion. The others are ICICI Bank $3.4 billion, HDFC $3.3 billion, Bharati teli Ventures $2.7 bilion, Satyam $2 billion, ITC $1.6 billion, HDFC Bank $1.4 billion, Bhel $1.2 billion, Hindustan Leevers $1.1 billion and NTPC and SBI with $1 billion each.

The largest FII is the US-based Capital Group with an investment of $1.5 billion in the country. This is followed by HSBC Global, Morgan Stanley, Allamanda, Emerging Markets GF, Merrill Lynch, etc. As already mentioned this capital is taking over even small companies as can be seen from the purchase of a 26% stake in the Delhi-based pathological chain, Dr. Lal Path Labs by the US venture capital fund, WestBridge.

In fact the figures of foreign penetration are even more that what was mentioned in October if we are to go by facts mentioned in an article that appeared in Business Today (Dec.5 04). The figures for one year back are as follows:

In this one years time with the heavy inflow of FII funds these figures would have gone up drastically. So, for example the Infosys percentage has gone up to 55.2% and the Indusind bank has raised the foreign investment limit to 74%. It is not surprising that the Infosys head, Narayan Murthy openly talks as an American stooge.

What is more, with the influx of foreign capital and control over the country, though politics is left to ‘Indians’, companies are being now more and more directly run by foreigners. More and more companies, not only MNC subsidiaries, but also ones run by compradors are bringing in foreigners to head them. The most recent such change was at the Hindustan Lever Limited which has had an Indian to head it for the last 50 years. These chiefs are paid phenomenal salaries which can be 50% more than what was paid to the ‘Indian’. During the British Raj this was a method of indirectly transferring vast sums abroad. It is now being repeated today. In this year alone over one dozen foreigners have replaced Indians to head the companies. These include Coca-Cola Bottling, SpiceJet, Kngfisher, GoAir, Air Deccan, IndiGo Airlines, Goldman Sachs, Intel India and CSC India. Earlier even MNCs normally kept Indians to head it as their front men. Now even compradors like SpiceJet and Kingfisher are keeping foreigners to run their establishments. These are being paid anything from $1,50,000 to $2,50,000 per month — i.e. they are being paid anything from Rs.70 lakhs to Rs.1.1 crore per month. (Economic Times, Dec.19 2005) Most of this will be in foreign exchange and does not include the perks they receive.

So, we find today that the compradors are getting more deeply entangled with the Imperialists while a large number of smaller elements are getting wiped out, in order to survive in this market which is being more and more thrown open international competition. It is becoming even more difficult to survive without the prop of some imperialist.

And the governments at both the Central and State levels are bowing lower and lower to imperialist and MNC dictates. They have on their agenda to open the huge retail sector to 49% foreign capital. Already the giants of the world retail chains like Wal Mart (US — and the biggest company in the world), Tesco (UK), Casino (French), etc are negotiating with local collaborators even before the government has passed the necessary legislation. For all the CPM’s hypocritical opposition the West Bengal CM has himself been talking to heads of these retail chains about investment in Kolkota. The government is also talking about allowing foreign law firms, foreign Charted Accountant firms, allowing 49% in ARCs (Asset reconstruction Companies), allowing Venture Capitalist funds into Real Estate, and has even presented a road map for financial sector reforms at a meeting of the Indo-US Financial & Economic Forum at New Delhi on Dec 5th 05.

Today it is the big compradors, the powerful NRIs (like Mittal and others) and the imperialists who are tightly bound in the web of the imperialist system seeking markets not only in India but also abroad. It is this international mafia that is squeezing the last drop out of the Indian masses. While they make crores each day the masses are being pushed deeper into the abyss of poverty and disease. It is not possible to reform this monster or give it a human face; it requires a sharp surgical strike.

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