On the Fly: The Next Gorilla
Naazneen Karmali,
Under Anand Mahindra, 2009 has been a banner year for his $6.3 billion (revenues) group. Seven months ago infotech arm Tech Mahindra outbid Wilbur Ross and Larsen & Toubro to pick up scam-hit outsourcer Satyam Computer Services for $625 million. In July the group led a revival of India's IPO market with the listing of time-share unit Mahindra Holidays & Resorts. Auto flagship Mahindra & Mahindra is on course to launch its pickup truck in the U.S. in early 2010. FORBES ASIA caught up with Mahindra, 54, in Mumbai in late November:
FORBES ASIA: Does Prime Minister Manmohan Singh's recent visit to the U.S. signal a shift in the arguably China-centric U.S. policy?
Mahindra: I don't think it does. The U.S. cannot afford to turn its back on engaging with China, because it's the new Goliath out there. President Obama is doing a good job of balancing with India, which is the next gorilla in the making. The signal to China is very clear that their [U.S.] relationship won't be at the cost of their strategic relationship with India.
Are you convinced that the U.S. has fully recovered from the economic tsunami?
The American recovery is clearly a jobless recovery. On my last trip to the U.S., some businessmen were telling me that they were greatly concerned about the shift in the attitude of entrepreneurs towards employment-intensive businesses. This newfound reluctance to do business the old-fashioned way is worrying and will affect the country's recovery in the long term.
If India has been insulated from the global financial mess, what do you credit?
India's been lucky, and I would put it down to three Ds. Firstly, the developmental stage that we're at. We've reached a tipping point in consumption-led growth, which is hard to stop in its tracks. The second is our distance from world markets. Exports are a low percentage of our GDP, and our financial markets are not as integrated with world markets. The third D is India's demographics. The higher percentage of young people in our population and their propensity to consume is a powerful propeller of growth.
In the latest quarter, GDP grew almost 8%, well above estimates. Is India's growth story as an emerging superpower, like China, a mirage or reality?
It's for real but sometimes missed because India takes one step at a time and doesn't do radical things. We don't raze our slums overnight to build freeways; instead we build a Four Seasons hotel next to a slum. Ours is a qualified story, full of caveats. But it may turn out to be the case of the tortoise and the hare. Our vulnerability has to do with our geopolitical fragility. We have to control internal insurgency from the Maoists and our neighbors.
The launch of Mahindra's pickup trucks in the American market is imminent. The timing seems a bit off, doesn't it?
Sometimes the best time is when everyone is advocating against it. The reality is that we're going in with a compact diesel pickup that gives 30 miles per gallon. There's a space in the market for this new, green product. The erstwhile behemoths of the U.S. auto industry are in the midst of restructuring, so there are good dealerships available. There could be no better time for a challenger.
The Logan sedan hasn't done too well. Overall, has your partnership with Renault-Nissan lived up to your expectations?
No, it hasn't, but that precisely is the problem: We had exaggeratedly high expectations. We built capacity for 5,000 Logans per month and were confident of selling that many. Initially, we sold 2,000 Logans per month, which is now down to 500. This happened due to the government slapping differential taxes on large cars, which gave enormous benefit to smaller cars. We could have done some lIPO-suction and adapted it in response to the new tax structure, but since the Logan is not our product, we weren't able to.
You'd described the Satyam takeover as a "game changer." Eight months on has it proved so, especially in light of the recent revelation that the fraud is much bigger?
There's nothing we've seen so far in Satyam that makes me change my mind. The scam has to do with the past. We bought it on an "as is, where is" basis, taking into account the firm's clients, its employees and future potential. The magnitude of the fraud is for all intents a theoretical number.
