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Alliance baffles hong watchers

THE tie-up announced last week between Jardine Strategic and Tata Industries falls into the 'small but curious' category of business deals. Small, because the sums involved are relatively insignificant for these trading empires; curious, because of the information vacuum surrounding the deal.

Beyond the bare bones,neither group was forthcoming about the long-term intentions and strategies behind the link-up and those Jardines watchers still in Hong Kong over the Easter break were left speculating about this latest turn of events.

In short, Jardine pays US$35 million for a 20 per cent stake in the Indian company. The announcement was accompanied with the usual bland comments about long-term, mutual benefits involving the sharing of management skills and experience in infrastructural development. But where this leaves Jardine's global plans with the June 1997 handover looming ever larger and what Tata sees in the deal for itself are yet to be fully explained.

Jardine's increasing unease with the press - to the point where it responds like a company under siege rather than one with a buoyant balance sheet providing ample scope for expansion - means that the process of explanation will be slow.

Although Alasdair Morrison, the managing director, made the announcement, it is understood that the heavy lifting to get the deal in place was done by Henry Keswick, the chairman and member of the controlling family, during a meeting several months ago with Rata Tata, the Indian group's chairman.

An obvious conclusion reached by seasoned Jardines observers was that the company is displaying its intention to turn further away from China as a potential home for large-scale future investment after its latest rebuff by Beijing over plans to become a key player in the development and operation of Container Terminal Nine in Hong Kong.

This, of course, was denied by Jardines. A series of recent property deals in low to middle income housing in Southeast Asia through its Hongkong Land arm have also given rise to speculation that the purchase of the Indian stake forms part of a broader plan to deepen its involvement in the region. The relocation of its listing to Singapore at the beginning of last year was a statement of this intention but it now appears to be putting management time and money into the strategy.

The Tatas were an obvious group for a company like Jardines to link up with. Patrician and aloof from the bustle of Indian business, which has developed since the country launched its economic liberalisation programme four years ago, the sprawling conglomerate is in urgent need of a shake-up.

But a compatibility of strategy has left Tata comfortable with granting Jardines the first ever direct foreign equity investment in a subsidiary, although they have several large foreign joint ventures.

The purchase of the stake gets Jardines nowhere near Tata's extensive hotel, steel and automotive operations but it provides an entree into the potential for retailing, airport construction, telecommunications and real estate projects whose operations are housed in the subsidiary.

Tata has failed to capitalise on the potential in most of these areas and Jardines could provide management skills to further these ambitions, although its debacle with Trafalgar House would indicate that the Indians should have a large say about who is brought in.

Real estate and retailing are areas which could provoke the sensitivities of Indian nationalists who continue to resent foreign investment while reform in the telecommunications industry is already at a relatively advanced stage. Despite these areas of concern, the opportunities which the irreversible process of liberalisation will throw up in the coming decades are immense and, as is argued in India, it could be less traumatic than in China.

Jardines have had an effective listening post in India for years through the local operations of Jardine Fleming, its 50 per cent owned subsidiary. This will have given it ample time to build contacts and cement relations in India which were allowed to lapse after Jardines turned its back on its previous life in India as an opium trader based in Calcutta rather than Bombay.

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