Given the fact that commodity producers are vulnerable to commodity cycles, will you continue to remain a commodity player or move up to produce specialty products like global chemical majors?
Most global chemical majors are specialty producers and they invest large sums to develop new chemical entities to spur growth. That option was hotly debated in the company when we launched our globalisation drive five years ago. In 2005-06, we started our innovation programme by setting up an R&D centre to look at promising technologies in chemistry and a new range of products. We decided to focus on nano and biotechnologies, particularly the bio-nano interface. Our bio-fuels project is an outshoot of this process. However, innovation is a long-term strategy and it will take time to reveal its benefits. Over a period of time, we want to move to more knowledge-intensive, less capital-intensive, less polluting, cleaner and green technologies. But in the interim, we have to appreciate that TCL is successful in the commodity business and it makes sense to consolidate its global position in that segment. Over the next 10 years, we’ll look at new technologies and introduce a new range of products. Over a period of time, the face of TCL will change.

How have global acquisitions helped you to achieve your long-term vision?
Our global acquisitions were mainly to establish a meaningful global presence in the industries we are currently operating in, rather than to assist our long-term goal to move into new technologies or products. If you want to operate in the commodity business, you have to participate in global trade flows. You need to de-risk your business by operating in various countries, developing flexibility to serve global customers from cost-effective locations — these were the reasons for our acquisitions. Through our acquisitions, we have transformed from a small Gujarat-based synthetic soda ash player, catering to only the domestic market, into a global major with majority production coming from cheaper natural resources. Although we can’t charge a premium in the commodity business due to lack of differentiation, our flexibility and competitiveness have increased due to access to low-cost raw material. We can now serve a particular set of customers more efficiently than others.

What has TCL brought to the table for the acquired companies?
Both the companies we acquired were previously run by private equity (PE) players. So, an acquisition by a chemicals company, which understands them and is ready to invest in them for a sustainable growth, is a good thing. We are actively investing to help these companies grow. For example, we invested in a sodium bicarbonate facility in Brunner Mond Europe, which will become operational in early 2009. So, we have created a totally new line of business for this group. Similarly, in Kenya we are looking at a major capacity expansion.
We brought the assurance that those assets are valuable and of strategic importance to TCL’s future. This dramatically changes the operating paradigm for the incumbent management used to serving the needs of financial investors. The companies we acquired were running efficiently under the PE management. So, there wasn’t much scope for further cost-cutting in the traditional sense. Actually, it is not always right to look at cost-cutting as a way to create value in an acquisition. When you make an acquisition, you have to invest in the business; you have to develop it, nurture it and then it will grow. We do not view our acquisitions as tools to boost short-term profits.

In these acquisitions, did you benefit from being part of the Tata Group?
Being part of the Tata Group definitely helped us. Our first acquisition was made prior to the Corus deal, which substantially increased Tata Group’s visibility globally. In comparison to the first, our second acquisition was simpler, thanks to the experience gained in the former. Also, the Tata name was much better known due to the Jaguar-Land Rover (JLR) acquisition and Nano’s launch. In the meantime, our culture of ethical management and corporate social responsibility had become globally known. This created Tata Group’s image as a very large, progressive and highly respected company, which helped us in the acquisition and integration process.

What are the most important things to make an acquisition successful?
The softer issues are most important in any acquisition compared to the so-called harder ones. The employees of the acquired company must feel they have gained from the acquisition. For this, you have to sell yourself to the acquired company and create that feeling. There’s no point in acquiring something and creating a feeling of loss or uncertainty, which is detrimental to the process of integration and future growth. There has to be something in it for the employees of the acquired company.

What preparations did you need before going global?
A few years ago, our group decided to encourage companies to go global because we knew that after a certain point of time, it will become essential for sustainable future growth. This helped to prepare ourselves much before actually going global. In fact, we launched our executive training programmes for internationalisation two years before our first acquisition. This equipped our people with what was needed in running a global business. We trained people in foreign markets, culture and business. We also had clear HR policies and strategies in place to facilitate the integration process even prior to these acquisitions. Looking at the speed with which we completed the acquisitions and the integrations, I believe all our earlier efforts paid off.

Which set of metrics does TCL use to measure the success of an acquisition?
In any acquisition, the most important measure of success is value creation. Both our acquisitions were value-accretive and will give TCL sustainable advantage in future. The other metric commonly applied is how swift and smooth the integration process has been. On this score as well, I think we can claim to have succeeded. The integration of our latest acquisition was completed in just 50 days and many of the benefits are already accruing to the bottomline.

The global economic environment is currently very uncertain. Has this affected the company’s long-term plans regarding GCIP/Brunner Mond group?
Despite the turbulence on the economic front, the outlook for soda ash continues to be positive. While Chinese capacity is coming back on stream, all incremental production seems to be fully absorbed within the country. Globally, demand is still ahead of supply. Our growth plans for the acquired companies are mainly long-term, which will continue unabated.

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