There seems to be two disparate takes emerging on the India Growth Story — a depressing visage painted by credit rating agencies and a much more optimistic view being taken by investors putting their money on the ground. This is perhaps amply exemplified by credit rating agency Standard & Poor’s approach to India.
Just two months after an S&P statement in late August that India’s long-term growth prospects “could weaken on a sustained basis, with negative implications for the sovereign credit fundamentals”, S&P’s parent McGraw Hill Financial announced in November that it has hiked its investment in its India credit ratings and research arm — Crisil Ltd — and effectively increased its stake to 67.8 per cent from 52.8 per cent.
McGraw Hill Financial is not an exception. The latest in the long list of multi-nation corporations that have ramped up stakes in their Indian operations includes GlaxoSmithKline plc, which late last week announced its decision to raise its shareholding in its listed Indian pharma subsidiary from 50.7 to 75 per cent. A further reaffirmation of the British firm’s faith in the Indian market came from the fact that it was ready to shell out a 26 per cent premium over the closing share price on December 15 to acquire the additional holding in GSK Pharmaceuticals Ltd at a cost of over $1 billion (about Rs 6,400 crore).
Significantly, the move by GSK was despite two major reverses that it faced in its India operations — the patent on the company’s cancer drug, Tykerb, being revoked by the patent controller’s office earlier this year and its blockbuster antibiotic brand, Augmentin, being recently placed under price control.
Earlier this year, in February, GSK had spent $900 million for increasing its stake — from 43.2 to 72.5 per cent — in its other subsidiary in India that markets consumer brands. In July, the Anglo-Dutch consumer goods major Unilever plc. shelled out $3.2 billion to hike its stake in Hindustan Unilever from 52.5 to 67.3 per cent.
While the continuing faith that big multinationals have reposed in the India story is reassuring, there are also grim reminders of how easy it is to squander it all away. Just earlier this week, the Indian unit of Vodafone Group Plc was served a tax demand by incomes tax authorities to pay Rs 3,700 crore in tax and interest in a case relating to the sale