A few days back, Emergent Labs received a 200 crore investment making it another prominent company taking on global players like Lovable, Bolt, etc. One of the discussions post this investment was that an Indian player would be competing over the prompt to product AI coding tools market across the globe. The question arises can we truly call Emergent Labs to be an Indian company?
Emergent Labs has ~75% workforce based in India while the rest is in USA. And also the company itself is most likely incorporated in USA (there is no public incorporation data I could find, but given their Privacy Policy mentions “based in US with operations in India” - its a safe bet that they are US incorporated). Does it have a Indian subsidiary? I would assume yes given they have a Bangalore office with 75% workforce in India.
So there’s our dilemma, what should be the definition that helps us call a company native or otherwise?
Why does it matter? This is a good question which would have subjective answers. For me it matters as a metric to track the progress of my nation. The nation of incorporation for a company may mean that the nation is its primary focus or market. Companies usually invest back in their primary markets. Sounds like a good metric, right?
So by this definition - Emergent Labs become a US company. US is their incorporation - which is an indicator that US is their primary market and that is where their investments are going to flow.
Since we have a definition now, its time to test it with various examples - we have companies like Nothing, Tesla, Unilever, Zoho, Accenture, and Capgemini for instance that would give us variety.
Nothing: Parent incorporated in UK, subsidiary CMF incorporated in India. In the next few years Nothing has planned to invest ~700 crores in India to manufacture CMF phones within the country.
Tesla: Tesla India is a native subsidiary of parent Tesla Netherlands which is again a subsidiary of parent Tesla Inc in US.
Unilever: Parent is UK incorporated with Hindustan Unilever as Indian subsidiary. Unilever makes a lot of acquisitions in India and also India is its second largest market by revenue.
Zoho: This is one of the most Indian company we can think of however its parent is incorporated in US with India getting a subsidiary - while the founder and majority headcount in India. However North America is the biggest revenue generating market by a big margin (46% revenue). Does this justify them having US parent? Not sure Unilever is still British, why not US where they have biggest revenue market?
Accenture and Capgemini: Both are considered as global IT companies - they have a big percentage of headcount in India, however the majority revenues are from outside markets - hence India plays a role of global delivery centre which itself brings huge investments from both the companies.
As an additional example, OpenAI recently formed a subsidiary in India to focus on Indian market. However there was no technical hiring indicating that the engineering and R&D which would be the majority investment for its business would not be done in India.
If we go with the definition, none of the companies listed above would classify as Indian, so shall we not consider them part of India’s growth story? In case of Zoho even though it has a US parent, if we ask anyone within the company if they are a native company - the answer would be YES! So whatever the builders of the company believe they are they would be? That does make sense because in itself is much more powerful than a mere legal definition. Only issue is that we wanna use our definition as a metric of growth and belief won’t itself bring growth.
If we consider Unilever, India is a huge market for the company and also HUL is listed on the Indian stock exchange bringing in a lot of Indian shareholders on the table. Unlike Zoho where the employees believe, in case of Unilever the market believes the company to be Indian. This what we can term as market belief while strong still does not help us to measure any economy growth.
At this point - I understand that viewing a company as native would simply be a pseudo metric. While most of the time it would be true that company’s parent incorporation would be the market they would be investing most in, there would be a lot of nuance involved. In that case why not just measure investment?
Hence the best metric would be simply a Measure of Investment a company is bringing within the local economy. Investment would be foreign investment product by a parent company or an Indian subsidiary or parent itself reinvesting the profits back into the economy instead of repatriation to parent.
So, its irrelevant whether people call Emergent Labs as Indian or foreign company, it matters more if they would keep investing in Indian talent and if the Indian market proves to be competitive to US so that instead of the Indian subsidiary repatriating funds, the parent would bring more foreign direct investment to the market.
In a way if each Indian subsidiary is having a trade surplus with its foreign parent - that would be a positive health indicator for the nations growth and future relevance.
# Subscribe if you want such pondering in your email inbox
subscribe to my email list