Professional Documents
Culture Documents
Acquiring a company is just the first step though. The real issues crop up in
integrating the acquired company and this is where many companies falter.
International studies show that integration problem crops up in 60% of acquired
companies. But Indian companies so far seem to have done reasonably well in
merging acquired company operations with parent operations. Many alliances don't
live up to the expectations because they stumble on the integration of technology and
operations. We have all heard about deals where stars seemed aligned but synergies
remained elusive. In these cases, the acquirer and target may have had
complementary strategies and finances, but the integration of technology and
operations are often proved difficult, usually because it did not receive adequate
consideration during due diligence.
Acknowledgement
Completing a task is not usually a one man effort and it often requires the help,
support, guidance and blessings of others. Hence I take this opportunity to extend
my thanks to all those people who have directly and indirectly helped me to complete
this dissertation.
I am deeply indebted to Prof. (Dr.) J.P. Saxena, my mentor & faculty guide Amity
Business School, Noida, for nudging my thoughts to decide upon the subject of
dissertation and providing me inputs from time to time to make the topic more apt
and succinct.
I also express my sincere gratitude to my parents, peers & friends for their support
and encouragement throughout the study. Their suggestions and views have been
quite handy in giving this study a proper shape and keep me abreast with the latest
developments in the business front.
Literature Review
Strategic Alliance - a general overview
In the last two decades, alliances have become a central part of most companies'
competitive and growth strategies. Alliances help firms strengthen their competitive
position by enhancing market power (Kogut, 1991), increasing efficiencies (Ahuja,
2000), accessing new or critical resources or capabilities (Rothaermel & Boeker,
2008), and entering new markets (Garcia-Canal, Duarte, Criado, & Llaneza, 2002).
By the turn of this century many of the world's largest companies had over 20% of
their assets, and over 30% of their annual research expenditures, tied up in such
relationships (Ernst, 2004). A study by Partner Alliances reported that over 80% of
Fortune 1000 CEOs believed that alliances would account for almost 26% of their
companies' revenues in 2007-08 (Kale, Singh, & Bell, 2009).
Strategic alliances are agreements between companies (partners) to reach objectives
of common interest. Strategic alliances are among the various options which
companies can use to achieve their goals; they are based on cooperation between
companies (Mockler, 1999). In practice, they would be all relationships between
companies, with the exception of a) transactions (acquisitions, sales, loans) based on
short-term contracts (while a transaction from a multi-year agreement between a
supplier and a buyer could be an alliance); b) agreements related to activities that are
not important, or not strategic for the partners, for example a multi-year agreement
for a service provided (outsourcing) (Pellicelli, 2003). Strategic alliance can be
Strategic alliances are long-term agreements between firms that go beyond normal
market transactions but fall short of merger. Forms include joint ventures, licenses,
long-term supply agreements, and other kinds of inter-firm relationships. (Porter,
1990)
Strategic alliance was also perceived as long-term co-operative partnerships
involving vendor, customer, competitor, or industry-related firms and was used to
achieve some competitive advantage (Stafford, 1994, p.64).
Strategic alliances are voluntary arrangements between firms involving exchange,
sharing, or co-development of products, technologies, or services. (Gulati, 1998)
Regardless of the broad variety of definitions for strategic alliance, all have certain
similarities (Spekman, 1998):
- Each has goals that are both compatible and directly related to the partner's
strategic intent,
- Each has the commitment of, and access to, the resources of its partners and,
Each represents an opportunity for organizational learning.
Arino et al. (2001) define alliance as a formal agreement between two or more
business organizations to pursue a set of private and common goals through the
sharing of resources (e.g., intellectual property, people, capital, organizational
capabilities, and physical assets) in contexts involving contested markets and
uncertainty over outcomes. According to Hill (2005), strategic alliance is referred as
the cooperative agreements between potential or actual competitors; it is a
relationship between firms to create more value than they can on their own.
However, his definition narrowed the partner selection to competitors.
under this category. And the competence to apply the managerial resources is the
competence to unify their resources with those of other firms, coordinate them, and
make them work together.
The aforementioned presents a new challenging issue to managers who have only
attended to the accumulation and distribution of their own resources. This new
challenging issue is, namely, the accumulation of highly scarce managerial resources
in their own firm via mutual relations with other firms, and the skillful application of
the accumulated managerial resources through mutual relations with other firms.
And in this sense, it is at the point when managers realize that they must take into
account mutual relations with other firms and plan and execute a corporate strategy
that they are first able to grasp alliances, as one of the strategic methods, in
connection with the internal factors of the firm. Indeed, the meaning of the fact that
alliances are "strategic" when they are grasped in conjunction with a firm's internal
factors can be sought in the following two points:
a) Alliances are used to acquire the managerial resources of other firms and
accumulate highly scarce managerial resources
b) Alliances are used to skillfully apply the managerial resources of their own firm
and those of alliance partners.
With respect to the various alliances that firms weave, only by carefully approaching
them from the above two points can we clear up the important unresolved issue
indicated by Badaracco, namely the reason for engaging in alliances.
the future (Doz and Hamel, 1998). Strategic alliance has become a favorable choice
for many multinational companies as a strategy responding to rapid economic
development and increasingly fierce competition in the global market (Gulroy, 1993).
Compared with other widely adopted strategies, such as mergers and acquisitions,
major companies prefer to choose the 'bond' option rather than the 'buy' or 'build'
option to stimulate growth and increase corporate wealth (Pekar and Margulis, 2003,
p.50). With the prevalence of the strategic alliance in recent decades especially in the
last years of the 20th century, Cyrus and Freidham (1999) believe that it will become
the primary way of global consolidation in the near future, and it may also become
the most powerful tool to maintain a firm's sustainable competitive edge. Just as
Gilroy (1993) stated that the strategic alliance has become a favour for many
multinational companies as a strategy responding to the rapid economic and
technological development, globalization and dynamic nature of the market.
While with alliances, companies can access global markets and contribute to
economic development without steep exposure to market and political turmoil
(Cyrus and Freidheim, 1999, p.48). The motivations for the formation of an alliance
can range from purely economic reasons (e.g., search for scale, efficiency, or risk
sharing) to more complex strategic ones (e.g., learning new technologies, seeking
political advantage) (Arino, et al., 2001).
Firstly, companies are seeking for co-option during its globalizing process. Co-option
turns potential competitors into allies and providers the complementary goods and
services that allow new business to develop and usually multinational companies
seek partners with similar products who have a good knowledge of local market and
channels of distribution in order to share the risk during the expansion of the global
market (Bronder and Pritzi, 1992; Doz and Hamel, 1998; Cullen and Parboteeach,
2005). The privileged market access of some countries sometimes can be a reason for
MNC to search for alliance under the globalization movement (Bleeke and Ernst,
1991; Bronder and Pritzi, 1992; Doz and Hamel, 1998).
Secondly, co-specialization has become a more and more attractive force behind the
strategic alliance. It is the synergistic value creation that results from the
combination of previously separate resources, positions, skills and knowledge
sources. By bringing the resources of two or more companies together, strategic
alliances often provide the most efficient size to conduct a particular business
(Bronder and Pritzi, 1992; Cullen and Parboteeach, 2005). Through the way of
alliances, partners can contribute their unique and differentiated resources to the
success of their allies, i.e. skills, R&D, brands, networks, as well as tangible and
intangible assets (Bronder and Pritzi, 1992; Doz and Hamel, 1998).
Alliance may also be an avenue for learning and internalizing new skills from its
partners, in particular those that are tacit, collective and embedded (Bronder and
Pritzi, 1992; Doz and Hamel, 1998). Therefore, it is self-evident that strategic alliance
is central to the corporate strategy and it is significant and unavoidable for the global
reaching step in the world economy.
To a nutshell, when confronting with the newly opening markets, intensified
competition, and the need for increased scale, many CEOs have put the formation of
cross-border alliances on their agendas since 1990s. To international managers, the
strategic benefits are compelling under the synergy effects among partners; and it is
a flexible and efficient channel to crack new markets, to gain skills, know-how, or
products, and to share risks or resources (Bleeke and Ernst, 1991).
Break of Alliances
Although alliance break-ups and member withdrawal are also common, running as
high as 50 percent in some industries, much less is known about these events
(Broschak, 2004: 608; Burt, 2000; Podolny & Page, 1998). Nevertheless, an
understanding of them is basic to the development of realistic and informative
models of alliance behavior and network dynamics (Kogut, 1989). Alliance break-ups
alter the network positions of the firms involved, their immediate partners, and more
socially distant firms, as an initial break-up triggers others (Nohria, 1992; Powell et
al., 2005). Resource scarcity and misalignment of alliance partners' resources and
interests create friction that may trigger member withdrawal (Baker, Faulkner, &
Fisher, 1998; Koka, Madhavan, & Prescott, 2006; Rowley, Greve, Rao, Baum, &
Shipilov, 2005). Similarly, member withdrawal may occur when embeddedness is
low.
Despite the growing popularity of strategic alliances, the success rate remains low,
and also a number of recent studies have noted that the failure rate of alliances is in
the range of 50-60% (Spekman et al., 1996; Dacin et al., 1997; Kok and Wildeman,
1998; Frerichs, 1999; Andersen Consulting, 1999; Duysters et al., 1999; Kelly et al.,
2002). This is about the same rate identified in studies done by McKinsey and
Company and Coopers and Lybrand at the beginning of 1990s (Stafford, 1994, Kelly
et al., 2002).
Studies have shown that two thirds of all alliances experience severe leadership and
financing problems during the first two years (Bronder and Pritzi, 1992, p.419).
Evidence showing that even those ventures that finally succeed must frequently
overcome serious problems in their early years (Kelly et al., 2002). For instance,
Bleeke and Ernst (1993) found out that 66% of cross-border alliances they studied
confronted with serious managerial problems in their first two years of the alliance.
The other study done by a Bain and Co. also indicated that in every ten alliance
relationships, five would fail to meet the partners' expectations and of the other half,
only two would last for more than four years (Rigby and Buchanan, 1994).
Draulans et al. (2003) find that an inadequate capability to manage the alliance is the
main reason. As Robert E. Spekman state that leadership played a key role to the
success of alliances. Another frequently cited reason is poor selection of alliance
partners; due to competitive pressures, many firms rush into alliances without
adequate preparation or understanding of their needs, the incompatibility of
partners will lead to insurmountable problems (Medcof, 1997; Dacin et al. 1997).
Other reasons that are often cited for the alliances failure include lack of trust
between partners, cultural conflicts, incompatible chemistry, unique risks inherent in
strategic alliances, and lastly focusing on alliance formation rather than sustaining
the alliance (Gomes-Casseres, 1998; Kelley et al., 2002).
International alliances are increasingly central to the corporate success; however,
they often end up in divorce. As Fedor and Werther (1996, p.39) point out that in
many cross-boarder alliances, the failure stems from the deal maker's concentration
on strategies, financial, and legal complexities, while largely ignoring issues of
"cultural compatibility" among the alliance partners. Therefore, cultural differences
could become a barrier to success, especially at the initial stage. Besides that, the
failure to build trust between partners in the early stage of the alliance could be
detrimental to further development to the next stage. Trust building is also closely
linked to the cultural compatibility between partners. Stafford (1994, p.70) indicates
that if partners lack compatible cultures and expectations, the trust between partner
employees may not materialized, which will lead to inter-partner employee conflicts.
Introduction
Food & Beverage
Coffee consumption has risen sharply, almost doubling in between 1998 and 2008
from 50,000 metric tonnes in 1998 to 94,400 metric tonnes in 2008, according to
India's Coffee Board. The growing coffee culture is being driven by demand from the
country's emerging middle classes but India's retail coffee market remains highly
fragmented and is dominated by small street-side vendors. Local chains, including
Caf Coffee Day and Barista account for less than a third of the total domestic
market, according to analysts.
The Deal:
Starbucks Corporation is an international coffee and coffeehouse chain based in
Seattle, Washington. Starbucks is the largest premium coffee retail chain in the world
with over 16,858 stores in 50 countries, including over 11,000 in the United States,
over 1000 in Canada, and over 700 in the UK. Retail growth outside the US is now
central to the company's strategy. The first Starbucks location outside North America
opened in Tokyo, Japan, in 1996. Starbucks entered the U.K. market in 1998 with the
$83 million acquisition of the then 60-outlet, UK-based Seattle Coffee Company, rebranding all the stores as Starbucks. In September 2002 Starbucks opened its first
store in Latin America, in Mexico City. In November 2010, Starbucks opened the first
Central American store in El Salvador's capital, San Salvador. In an investor
presentation, Starbucks International president John Culver said the company hopes
to operate at least 1,500 stores in mainland China by 2015. He also said that the
company sees exciting growth prospects in other emerging countries such as India
and Brazil.
Tata Coffee is coffee company owned by the Tata Group. Tata Coffee is Asia's largest
coffee plantation company and the third-largest exporter of instant coffee in the
country. It produces more than 10,000 million tonne of shade grown Arabica and
Robusta coffees at its 19 estates in south India. Its two instant coffee manufacturing
facilities have a combined installed capacity of 6,000 tonne. The company owns 19
coffee estates in Southern India. The estates are spread across the districts of Coorg,
Chickmaglur and Hassan in Karnataka and Valparai district in Tamil Nadu. Tata
Coffee, one of the biggest suppliers of Arabica coffee beans
In a significant step toward market entry in India, U.S.-based Starbucks Coffee
Company on January, 2011 signed a non-binding memorandum of understanding
(MoU) with Tata Coffee. Starbucks and Tata Coffee announced plans for a strategic
alliance to bring Starbucks to India later that year. Starbucks plans set up stores in
Tata retail locations and hotels in India, and also to source and roast coffee beans at
Tata Coffee's Kodagu facility. Starbucks is aiming to tap a market where
consumption of coffee has more than doubled to 100,000 metric tons from a decade
ago. In the areas of sourcing and roasting, Tata Coffee and Starbucks will explore
procuring green coffee from Tata Coffee estates and roasting in Tata Coffee's existing
roasting facilities. At a later phase, both will consider jointly investing in additional
facilities and roasting green coffee for export to other markets.
Synergies/ Outcome:
"India is one of the most dynamic markets in the world with a diverse culture and
tremendous potential," said Starbucks Coffee Company Chairman, President and
CEO Howard Schultz. This MoU is the first step in our entry to India. We are focused
on exploring local sourcing and roasting opportunities with the thousands of coffee
farmers within the Tata ecosystem. We believe India can be an important source for
coffee in the domestic market, as well as across the many regions globally where
Starbucks has operations."
Local Partner - For Starbucks, it requires a local partner to open retail stores in Asia's
third-largest economy as under India's foreign direct investment regulation, a singlebrand retailer is only allowed to control up to 51% of a joint venture with an Indian
partner.. Tata Coffee, majority-owned by Tata Global Beverages Ltd., is a unit of
India's second-biggest industrial group. The knowledge and understanding of the
Indian market can be brought by Tata Global Beverages, because it has been in this
play for a while
Rising Exports - Coffee exports from India, Asia's third-biggest producer, gained 56
percent last year, the Coffee Board said earlier this month. Tata Coffee and its
domestic rivals boosted shipments 56 percent to 292,550 metric tons. Given the
scenario, Starbucks realised that forging an alliance with Tata Coffee will increase
their market share and expand their reach to the world market.
The MoU will create avenues of collaboration between the two companies for
sourcing and roasting as Tata Coffee and Starbucks will explore procuring high
quality green coffee from Tata Coffee estates and roasting in Tata Coffee's existing
roasting facilities in Coorg in South India. At a later phase, both will consider jointly
investing in additional facilities and roasting green coffee for export to other
markets.
In addition, Tata and Starbucks will jointly explore the development of Starbucks
retail stores in associated retail outlets and hotels.
Two companies also will explore social projects to positively impact communities in
coffee growing regions where Tata operates.
The Indian group has deep experience in running food supplies, so it can handle that
part of the outlets. But in terms of running cafes, Tata has no specific advantage,
where Starbucks holds the expertise. Starbucks plans to open standalone outlets in
all big cities as well as inside Tata-owned luxury hotels and retail stores,
The agreement provides a win-win situation for both partners. Tata can leverage the
Starbucks name, and vice versa. The entry of more players means the market will
grow. India can absorb up to an estimated 5,400 outlets; at the moment, the number
is over 1,300.
IT Sector
The broader trend in the IT sector is that mid-size companies finding difficult to
grow, are looking to merge with business rivals or sell out. The post-recession period
has brought in large business orders for IT behemoths and specialized companies,
but generic mid-size IT firms haven't benefited as much. Industry estimates peg the
annual growth rate of top-tier IT firms like Infosys and TCS at around 20-25% this
fiscal, while the corresponding growth rates for tier II companies are estimated in the
range of 10-15%. IT sector analysts go as far back as early 2008 to pick up indications
of consolidation in the IT sector. Mid-size IT firm MindTree had then acquired
Aztecsoft to boost its capabilities in outsourced product development (OPD) and
testing. Deals like these are now becoming common and the trend is set to intensify
in 2011. According to data provided by Venture Intelligence, in 2010, the IT sector
saw 115 M&A deals-largely in the small and mid-sized IT space. This figure was lower
at 92 in 2009.
Arup Roy, senior research analyst at Gartner, says marginal players are facing tough
times. "We can expect more consolidation next year. Companies that do not have the
size and scale to take advantage of new business opportunities will be obliterated," he
said.
Avinash Vashistha, CEO of IT advisory firm Tholons, adds that apart from the fact
that mid-tier companies are losing big contracts to IT majors, they are also not being
able to customize or tweak business models to execute smaller contracts. They follow
a software factory model that is suited for large contracts, which are typically won by
the top 5 IT companies.
Abhishek Shindadkar, research analyst with ICICI Securities, said that generic midsize companies are also affected by operational concerns such as wage inflation and
pressure to increase marketing spends. MindTree has been reporting margins of 1415% in recent quarters whereas the figure for top-tier companies like Infosys and TCS
has been above 25%.
iGATE Corporation is an American information technology company founded and
based in Fremont, California with its operational headquarters at Pittsburgh,
Pennsylvania. The company specializes in business data processing and uses a
structure known as iTOPS (integrated Technology and Operations Systems) to meet
customer demands. Services provided include: IT consulting; application
development, data warehousing, business intelligence solutions, ERP/enterprise
solutions, BPO/business service provisioning, infrastructure management,
testing/independent verification and validation, and contact center services. Offices
are located in 16 countries and serve businesses in various fields. While the US has
long been its operations center, the company is undergoing an aggressive expansion
into India. By 2012, the company wants to be a billion dollar organization, for which
association should be with 100 of the global 1000 clients.
Patni Computer Systems Ltd., a Mumbai based mid sized Software Services firm is a
provider of Information Technology services and business solutions. The company
employs over 15000 people, and has 23 international offices across the Americas,
Europe, and Asia-Pacific, as well as offshore development centres in 8 cities in India.
Patni's clients include more than 400 Fortune 1000 companies.
The Deal:
Nasdaq-listed iGate Corp. announced that it, along with its partner, would acquire a
majority stake in Mumbai-headquartered information technology (IT) services
company Patni Computer Systems Ltd for around $1.22 billion (around Rs. 5,540
crores) in a deal that gives the former scale in the IT services business and ends
uncertainty about the future of the latter, one of India's oldest IT services companies,
but also one which has been in the news as a possible target for acquisition for at
least four years. iGate will now have 63% stake in Patni. The acquisition is among the
biggest involving an Indian IT company. In 2006, EDS Corp. acquired MphasiS BFL
Ltd for Rs. 1,748 crores. And in 2005, Oracle Corp. acquired i-flex Solutions Ltd for
Rs. 4,090 crores. The takeover is seen by analysts as a David and Goliath scenario.
While Patni registered revenues of $518.7 million in the 9 months ended September
2010, the corresponding figure for iGate is less than half of that, at $199.5 million.
Patni
iGate
Revenues
178.80
74.80
Net profit
28.80
14.30
EPS
0.21
0.25
Employee strength
13,995
6,910
Active clients
282
80
Financials for Q3 2010 in $mn, except EPS in $
Synergies/Outcome:
Clients: Patni will also enable iGate to widen its client base and reduce its
dependence on a few clients. iGate's top 10 clients bring 84% of total revenues versus
Patni's 48%. The combination will now have 2 clients that bring $100 million plus
revenues, 2 clients that bring $15 million plus revenues, and 36 clients in the $5
million plus league. General Electric is one of the biggest customers for both
companies and this is expected to bring synergies.
Presence: Patni has roughly two employees for every one iGate has and the combined
strength of the two will be around 25,000 employees. And while iGate has 82
customers, seven delivery centres and offices in 16 countries, Patni has 282
customers, 22 global delivery centres and offices in 30 locations. Patni has good
presence in the western and northern Indian region, while iGate has offices in the
south, which gives employees good options to move around the country.
Business Verticals: The merger could result in a more competitive entity. When a
company does not have the width of verticals, then it is restricted in terms of growth.
Hence, Patni was unable to take on bigger deals or huge orders.The two companies
will now enjoy synergies in business verticals. While 60% of iGate's revenues come
from banking and finance, 30% of Patni's revenues come from insurance. By
leveraging both strengths, the companies plan to build a strong BFSI team. BFSI is
the fastest growing business segment for the IT sector. With the acquisition, there
should be scope for cross selling and improvement in margins.
Ownership: Patni Computers was already having trouble among three founders of
Patni-Narendra Patni, Gajendra Patni and Ashok Patni regarding their share in the
company. The acquisition will end ownership woes in Patni and help the company
build its pipeline in the banking and financial services vertical, in which iGate earns a
large chunk of its revenues.
Revenue: The combined revenues of the merged entity, around $1 billion in size, will
help customers access more service lines and improved domain expertise. It can also
bid for large projects competing against IT behemoths including TCS, Infy, Wipro
and HCL. Smaller IT companies have in recent times struggled for revenue growth
and profitability, as they are unable to offer scale efficiencies or attractive pay
packages to retain staff. From iGate's point of view, it will be a huge asset. Patni has
an application, development and maintenance business of at least $450 million
(around Rs 2,025 crores). Its insurance business is around $240 million (around Rs
1,080 crores). Compare this with iGate's overall revenue of $230 million (around Rs
1,035 crores),"
Amalgamation: The deal also reopens the argument for a combined tech services and
BPO play - as the transaction marries iGate's BPO-ish skills with Patni's tech services
and development platform. Overall, combination will help customers get better
service, access to more service lines and deeper pools of expertise.
Debt: The biggest concerns that iGate officials point to is the cultural integration
between the two organizations as well as the debt on its books. IGate, which is
currently a zero debt company, will have debts in its books for the next few years.
Attrition & Integration: iGate is less than half Patni's size. Other than integration
challenges, there will be employee attrition issue as well.
Steel Industry
Tata Steel, formerly known as TISCO and Tata Iron and Steel Company Limited, is
the world's seventh largest steel company, with an annual crude steel capacity of 31
million tonnes. It is the largest private sector steel company in India in terms of
domestic production. Currently ranked 410th on Fortune Global 500, it is based in
Jamshedpur, Jharkhand, India. It is part of Tata Group of companies. Tata Steel is
also India's second-largest and second-most profitable company in private sector
Nippon Steel Corporation is the world's 4th largest steel producer by volume.
The Deal:
In January 2011, Tata Steel said it has inked a joint venture agreement with Nippon
Steel for setting up a Rs 2,300-crore specialty steel-making line having a capacity of
60,000 tonnes per annum at Jamshedpur to cater to the domestic auto sector. The
project is expected to be operational in three years. Tata Steel would hold a majority
51% stake in the unnamed joint venture entity while the Japanese major would have
the rest 49% stake. The project (Continuous Annealing and Processing Line) will be
set up at a capital cost of about Rs 2,300 crore and is expected to come on stream in
2013.
Synergies/Outcomes:
The demand for small cars in India is rapidly growing and Tata Steel aims to tap this
growing market. The JV aims to capture the growing demand for high-tensile autograde steel in India. Also, Nippon's technology would help Tata Steel to tap the
Japanese auto makers in the Indian auto market.
The joint venture entity would source steel from Tata Steel's Jamshedpur plant and
use Nippon Steel's technology for production of high-grade cold rolled steel sheet to
meet the growing needs of the Indian automobile sector.
Global auto majors like Honda, General Motors and Hyundai Motors currently
import steel for making cars. With this JV, Tata Steel hopes to discourage the
automakers from importing the special steel and, instead, buy from Tata.
The two companies aim to capture more of the local demand for auto steel, growing
at 13-15 per cent a year. Tata Steel has already around 40 per cent share of the
domestic auto steel market. Its European subsidiary, Tata Steel Europe, too, has its
own auto-grade technology. But according to Tata Steel, the technology cannot be
used in India. Europe and India use different kinds of auto steel. In Europe, more
galvanized steel is used because of corrosion, snow issues, etc. In India, it is more
continuous annealing steel.
Also, the auto steel product development can now happen jointly in the common
R&D. Now, there is a group R&D which reports to both the CEOs (Europe and India).
The agenda is drawn and the mandate is given that in auto steel we have to see what
we can do.
NTPC Limited (formerly National Thermal Power Corporation) is the largest stateowned power generating company in India. Forbes Global 2000 for 2009 ranked it
317th in the world. It is an Indian public sector company listed on the Bombay Stock
Exchange although at present the Government of India holds 84.5 of its equity. With
a current generating capacity of 33194 MW, NTPC has embarked on plans to become
a 75,000 MW company by 2017. It is premier power generation company in India
having expertise and strength in areas such as setting up of coal, gas and hydro based
power projects, operation and maintenance of power stations and sale of power to
various State power utilities and other bulk customers. NTPC has developed
comprehensive in-house expertise in various facets of power generation from concept
to commissioning, efficient operation to nurturing of ecology and environment in
accordance with National Power Policy of the Government of India.
Bharat Heavy Electricals Limited (BHEL) is one of the oldest and largest state-owned
engineering and manufacturing enterprise in India in the energy-related and
infrastructure sector which includes Power, Railways, Transmission and
Distribution, Oil and Gas sectors and many more. It is the 12th largest power
equipment manufacturer in the world. BHEL was established more than 50 years
ago, ushering in the indigenous Heavy Electrical Equipment industry in India. It is
one of the leading international companies in the field of power plant equipment
with state-of-the-art technologies. BHEL range of services extend from project
feasibility through design, manufacture, supply, erection and commissioning to after
sales-service of equipment required for generation, transmission and distribution of
coal, gas, hydro, nuclear and non-conventional energy.
The Deal:
In April, 2008, NTPC-BHEL Power Projects formed a 50:50 JV firm NBPPL, with a
focus on engineering, procurement and construction contracts, besides the
manufacture and supply of equipment for power plants. The JV has an order book of
about Rs 450 crores. It is targeting an order book of Rs 7,000 crores by the end of the
Synergies/Outcome:
The prime objective of the Company is to enhance the capability and capacity of the
Power Sector and supplement the efforts of both the promoter companies (NTPC and
BHEL).
JV Company will also work as a EPC company (Engineering, Procurement &
Construction) to take up turn-key jobs of power plant with a view to provide total
business solution to the customer from concept to commissioning.
Explore, secure and execute EPC contract(s) for Power Plants and other
Infrastructure Projects in India and abroad including plant engineering,
project management, quality assurance, quality control, procurement, logistics, site
management, erection and commissioning services.
To engage in manufacturing and supply of equipments for power plants and other
infrastructure projects in India and abroad.
Joint Venture manufactures main power plant equipment, such as Turbine,
Generator, Boiler to meet the growing demand of power in the country.
The joint venture between state-run NTPC and BHEL should also focus to establish
manufacturing facility for Balance of Plant, such as Coal Handling, Ash Handling
Plant and also focus on building equipment other than boilers, turbines and