Date:01/01/2004 URL: http://www.thehindubusinessline.com/2004/01/01/stories/2004010102130500.htm

Back Hostile takeovers still difficult: Paul

Our Bureau

Chennai , Dec 31

HOSTILE takeovers are still difficult in India, feels Lord Swraj Paul, the India-born British peer, who made news in the early 1980s by trying to seize control of Escorts and DCM.

In a meeting with journalists from the Hindu group of publications, Lord Paul said that the incumbent corporate management in India could still delay and defer hostile takeover bids. He said that he found it better to set up modern manufacturing units in India, rather than takeover existing units.

Lord Paul said that the Indian private sector had to accept its part of the blame for the economy not having developed well. He observed that (some) Indian companies did not repay bank loans. The companies also sought protection from the Government — protection is pleasant in the beginning, but creates problems in the long run, he said.

Lord Paul felt that although call centres were more visible, real flow of wealth into India would happen when the country gets more work from abroad. In this connection, he said that India would become the world's second largest financial centre.

He observed that China would remain the world's manufacturing base, but said that the only country that could compete with China was India. India could do it if Indian companies became competitive. To become competitive, Indian companies should bring down their cost of production. "It is surprising how much costs you can get down if you make up your mind to do so," he said.

Lord Paul said that he did not believe "brain drain" to be a problem. Non-resident Indians who do well abroad showcase India's potential, which results in more business to their compatriots. However, the UK Government has accepted that it should compensate those countries from where it gets manpower. Accordingly, UK's aid to India has been increasing.

He also noted that in the last five years, as many as 465 Indian companies had set up operations in the UK.

He said that India could also compete with China in getting foreign direct investment, but to do so, decision making had to be faster in the Government. "You spend two weeks in China and come back, you are ready to start operations there. You spend two weeks in India, they (the government) say, `send us a proposal in writing, we will respond'," he said.

The British peer observed that about 30 per cent of the children in India did not have access to education. "This is not an acceptable position." He also wanted more money to be spent on healthcare.