Paran Balakrishnan: World's the limit for Tata

The bulls are out to play once again, sending the bears scurrying back into their caves for a seasonal siesta. It started when Infosys, the country's second-largest software firm and the darling of the sharemarket, reported quarterly earnings that soared past its own and analysts' estimates. The market promptly beat the blues and began climbing to new record levels.

Since then, the flood of good news has turned into a torrent. The software firms have all beaten their own optimistic predictions and are hiring like there's no tomorrow. But they are being matched buck-for-buck by the old economy companies that have suddenly turned into stars.

In fact, it's Tata Steel, the ultimate old economy company founded back in 1907, that has quite literally made the world sit up and take note. On Friday, it agreed to a David and Goliath deal to take over Anglo-Dutch steelmaker Corus for US$8.1 billion ($12.11 billion), moving into fifth position in the global steel production stakes. For Tata Steel, that's up from 56th place. Inevitably, the British press reached for a cliche to declare: "The Empire Strikes Back."

For the 138-year-old Tata Group, it's an entry card into the billion-dollar takeover club. Back in 2000, the Tatas hit the global takeover trail by snapping up Tetley, a name familiar to most British households, for US$407 million.

Since then, the US$23-billion group that makes everything from salt to software, steel and cars has been reaching for its chequebook with amazing frequency. It has bought coffee and steel companies and, two months ago, Tata Tea flexed its muscles again, spending US$677 million on Glaceau, an American company that makes flavoured water. Software arm Tata Consultancy Services has been snapping up mid-sized software companies in different corners of the globe from Chile to Australia.

Back in the 1970s, a clutch of Indian companies such as the Birla conglomerate and the Oberoi hotel chain went on a buying spree outside India. But that was prompted by desperation to get out of the country as they were convinced the rising tide of socialism in India would stifle all chances of growth.

In 2006, the scene unfolding could not be more different. Indian companies, growing fast at home, are determined to become low-cost world-beaters. So many of them, from pharmaceuticals and software companies to steel giants, are on the prowl. The corporate spending spree has already been worth (including the Corus deal) about US$10 billion. That's amazing for a Third World country that had impenetrably tight restrictions on foreign spending until recently. Most astonishingly, Indian companies will likely spend more abroad than foreign companies will invest here this year. That's a cash turnaround nobody could have predicted until recently.

And it's the Tata Group, which has always had a reputation of being a slow-moving colossus, that has suddenly turned into a fleet-footed takeover conglomerate with a sharp eye for opportunities anywhere in the world. Chairman Ratan Tata, 68, said two years ago he wanted the group to feel "at home" wherever it was globally and he has been as good as his word.

For a start, there's Africa where Tata reckons it can leverage its understanding of Third World countries and conditions. The group's Tata Motors has, for years, been selling its hardy buses and trucks all over Africa. Now it's driving deeper into the continent and is looking at becoming a household name there.

First on the corporate hit-list is South Africa where the company has set up its African headquarters and where it has been selling buses and doing software work for almost a decade. More recently, it snapped up the country's second-largest telecom services provider and is looking at revving up car sales. And, earlier this month, Tetley, now a Tata subsidiary, bought a South African tea company, Joekels Tea Packers, with the aim of using its network to sell its brand in the country.

But the acquisition hit list hasn't been confined to any one country or industry. In steel, the Tatas fell behind because they were turning round their rundown plant in India and trimming costs. The result was that production figures had not kept pace with the rest of the competition. Tata Steel made up for that by buying National Steel in Singapore and Thailand's Millennium Steel. Now it has performed the ultimate leapfrog act with its Corus acquisition.

At a different level, the success of its cars and the fact that truck sales are booming allowed Tata Motors to look overseas and grab the troubled Daewoo's commercial vehicles operations. Leaping continents, it then pulled out its chequebook for Spanish busmaker Hispano Carrocera.

It isn't tough to figure out the calculations that are going into each takeover. Reaching for Tetley's teabags has enabled it to run a tea-garden-to-teacup operation (though it has sold a lot of its estates recently) and take Tetley's to India and other parts of the world.

Similarly, the Tatas own large iron ore mines in India and that will help slice costs at Corus, which is a notoriously high-cost producer. "Corus needs access to cheap iron ore of which India has the fifth-largest global deposits," says Deepak Lalwani, director of Astaire & Partners, a London-based brokerage.

Looking at the deal from another angle, Corus will give the Indian group access to customers of its high quality steel.

Should the Tatas be buying expensive steel firms and tea-makers outside India? In steel, it has hit the takeover trail at a point when prices have soared through the roof and the valuations of potential targets are sky high.

Also, should it be spending money in slow-moving European countries when there's a huge market at home that's growing in leaps and bounds?

The jury's still out on whether these are smart buys or not. But Ratan Tata, for one, has no doubt about the answers. "This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion," he said after the deal.

For almost a decade, Ratan Tata was derided as being too soft and ineffective to turn round the bureaucracy-ridden conglomerate. Corporate pundits said he had the right ideas but couldn't make them work.

He disproved them by beating the odds - and the big global brands - and making highly successful cars. A software arm has gone from strength to strength and even the telecom operation has proved a good bet. Now, the Tata patriarch is pushing on for his final conquests and taking on the world.