When Tata Steel paid out a hefty $13.1 billion to acquire Corus in 2007,
Chairman Ratan Tata described it as a defining moment for the company.
It is not hard to see why he thought this may be so.
It made Tata
Steels capacity grow three times, put the company on the global map,
and spread the risks of the business of making steel. The investment was
made in a climate when there was a tremendous buzz about outward
foreign direct investment (FDI), a time when a clutch of Indian
industrialists were persuaded to see value in making foreign investments
at extremely heady prices, which were sought to be justified on the
basis of over-optimistic profit projections and growth forecasts for the
world economy.
In hindsight, it is apparent that the acquisition was a
bad strategic decision, but it would have been difficult, if not well
nigh impossible, to predict such things as the Eurozones slide into
recession and the abrupt and unexpected slowdown in China. The damage
was compounded by cheap Chinese steel flooding western markets.
Read more