MADRID — The pursuit of technology is driving the growing number of foreign acquisitions by Indian firms as much as the search for new markets, top Indian business leaders said during a business conference in Spain.
Since 2000 Indian companies -- bolstered by rapid economic growth at home and looser rules on investing abroad -- have announced over 1,000 international mergers or acquisitions worth over 70 billion dollars (56.5 billion euros), according to research firm Dealogic.
Vijay Chandok, the managing director of ICICI Bank UK, the British subsidiary of Indian bank ICICI, said these overseas purchases are being fueled by the desire to diversify geographically as well as the need to acquire know-how in order to boost growth.
"They are looking to build capabilities by acquiring access to brands and patents," he said at the Global India Business Meeting, a two-day gathering of top Indian business leaders in Madrid which wrapped up on Tuesday.
In an example cited at the gathering, India's Tata Steel went from having not one single American patent to owning over 80 after it bought Anglo-Dutch steelmaker Corus in 2007 for 12 billion dollars.
As Indian firms have grown bigger, they have boosted their spending on research and development to help them move up the value chain.
But such investments take time to bear fruit and buying a foreign firm is an attractive short-cut to getting more sophisticated production equipment.
"Acquiring knowledge and the potential for research will continue to be a major driver of foreign acquisitions by Indian firms," said Ravi Chaudhry , the chairman of India's CeNext Group.
Often firms gain staff with needed skills that are scarce in India along with new technology when they buy a foreign firm.
Tata Steel for instance gained almost 1,000 research staff when it bought Corus.
Indian universities churn out millions of graduates each year but a large number lack the skills needed to satisfy the new global ambitions which many Indian companies now have.
International consultancy McKinsey estimates that only one-quarter of India's engineering graduates and 15 percent of its finance and accounting professionals are qualified to work for a multinational company.
"We have the financial resources, the intellectual power. We need to look at buying technology, buying engineering companies, brands. What India really lacks are brands, we do not have brands," said Rana Kapoor , the chief executive of Indian private lender Yes Bank.
The number of Indian firms on the Financial Times' list of the world's 500 largest companies by market value doubled from eight in 2007 to 16 this year.
This was the second edition of the Global India Business Meeting. The first was held last year in Munich, Germany.
Among the Indian companies that took part this year were Religare Enterprises, Nicco Group, Fortis Healthcare and Amira Foods.