Move over economic depression. For Indians, America might just be back with a bang
Fall in Canada is splendid. Around September to early October, for a couple of weeks every year, the changing leaf colours attract thousands of visitors. Two years ago, Dow India chairman Vipul Shah and his wife decided to take a trip to see the sight. There is this one train that goes to this place in Ontario, where the colours are at their best. It leaves early in the morning and returns from the small town of Sault Ste Marie.
The Shah couple was staying at a hotel across from the station to catch the early train. “We went down for dinner in the restaurant at the hotel. Both of us follow a totally vegetarian diet. So we asked the waiter what they could offer us,” says Shah. “Give me a minute,” said the waiter.
In a couple of minutes, the French-Canadian chef came out and listed the options: Vegetable curry, naan and basmati rice, with papad and mango pickle! The Shahs were stunned. Just as they were recovering, he dealt the coup de grace. “Or would you prefer a Jain meal?” he asked.
The chef revealed the secret a few minutes later. Sault Ste Marie, in Algoma district, had only one large employer: Algoma Steel. When the company went bankrupt, the town was in real crisis. That was when Essar Steel rode in from the East.
They took over the mill and invested to revive the mill as well as the town. While this was going on, Essar executives from India stayed in this hotel with their spouses. After a few days of eating nothing but vegetarian pasta, they approached the chef. “They asked me if their wives could use the kitchen to cook a vegetarian meal. I said, sure, but you will have to teach me as well. Now, we have Indian dishes on special request,” says the chef.
The steel mill at Ste Marie is now the second largest steel producer in Canada. It also serves arguably the best Jain meals upwards of the snow line.
The Essar deal was sealed in 2007, but in the last one year, more and more Indian firms have been heading to North America to use it as a base for business. Consider this: Indian direct investment in the US, according to the US Bureau of Economic Analysis, has gone up from $2.55 billion in 2009 to $4.88 billion in 2011. From 2005 to 2007, it was flat at $1.6 billion. Over the last one year, the S&P 500 index has delivered more returns than all other major indices, including Nifty50, Hang Seng and FTSE100.
It is no secret that the Indian corporate sector has had four frustrating years since 2009. Investments running into billions of dollars are stuck for lack of government clearances and fuel shortages.
For Indian companies, there are at least three interesting themes. The first is a play on the US’ attempt to become net energy exporter. The second theme is the return of manufacturing. As the energy costs have fallen, a range of industries—metal forming, aluminum, petrochemicals—are looking to return to the US. “The fact that the US is both the world’s biggest market and the world’s largest sourcing destination does help,” says Sheth. The third theme is Indian companies using the US and Canada in tandem to leverage natural resources and commodities.
This is the theme that Motherson Sumi, Varroc and Uniparts have been betting on. Motherson Sumi is the biggest among the three and Uniparts is the smallest. Aurangabad-based Varroc, an automotive part maker with a turnover of $450 million, realised that the demand was slowly coming back and began looking for acquisitions in early 2012. It bought the lighting business of Michigan-based Visteon. The growth in Visteon’s lighting business has given it a huge beachhead in the US market. It has also catapulted an almost-unknown company into the major league in India.
(This story appears in the 03 May, 2013 issue of Forbes India. To visit our Archives, click here.)