The recent increase of stake in Lumax

By: Ravii Kumarr
Submitted: 2008-07-17 11:11:03
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While discussing the potential of the Indian supplier industry in the global context with one of my European colleagues, I pointed out to him that most Indian suppliers are home-bred entrepreneurs, who have realized the opportunity window and mostly used the technical collaboration / minority equity stake method to bring in technical know-how, unlike China where most supplier ventures are joint-ventures with global suppliers, formed out of compulsion.

His contention was that as soon as the Indian industry reaches a significant size, the Boschs, Mahles and Danas of the world will start looking at it with a different perspective and will strengthen their presence in the country. At that point of time, the Indian entrepreneurs – at least some of them – will have to step aside as they will not be able to match the deep pockets and long-term staying power of the global majors. India will also be more important to these global suppliers as it will be an important sourcing centre for global vehicle programs as well as the aftermarket.

And you won't like an important base to be manned by allies, especially when the Indian entrepreneurs tend to partner a dozen global suppliers (look at Anands, Rane, TVS, Amalgamations etc etc) in different ventures at the same time. And Stanley is not the only case here. Bosch is keen to increase its stake in its Indian venture, even though it already has management control. On the other hand, Federal Mogul booted out its Indian partner Escorts last year – Escorts wasn't doing a great job there – to assume control of Goetze India.

The recent increase of stake in Lumax by Stanley electric certainly points in the direction predicted. Stanley sees Lumax as an important player in the Indian industry (reports suggest that Lumax has a 60% stake in the Indian automotive lighting market) and with global sourcing becoming a buzzword, it would be prudent to have Lumax under your own control. But is this going to be a trend? Maybe! In selective cases, where the Indian partner is pre-occupied with other things, it may be prudent to take control of things and run them yourself. However, in cases like the Rane Group, TVS group companies and some other respected entities, it may make sense to let the Indian partner do the day-to-day management. At that point of time, the Indian entrepreneurs – at least some of them – will have to step aside as they will not be able to match the deep pockets and long-term staying power of the global majors. India will also be more important to these global suppliers as it will be an important sourcing centre for global vehicle programs as well as the aftermarket.

And Stanley is not the only case here. Bosch is keen to increase its stake in its Indian venture, even though it already has management control. On the other hand, Federal Mogul booted out its Indian partner Escorts last year – Escorts wasn't doing a great job there – to assume control of Goetze India.

But is this going to be a trend? Maybe! In selective cases, where the Indian partner is pre-occupied with other things, it may be prudent to take control of things and run them yourself. However, in cases like the Rane Group, TVS group companies and some other respected entities, it may make sense to let the Indian partner do the day-to-day management.

Article source: Expert Articles