Well, this is India - an Emerging Economy. Emerging economies are called so because in a way they are highly unpredictable - a euphemism for the unpredictable third world if I may say so. The ways of the land, the way people conduct business there and almost everything about these countries is different. Even typical Government bond rates are higher! Risk is higher as well, which is why during the Asian crisis, although the problem was mainly with the Thai Baht, the contagion spread through Malaysia, Korea all the way to Brazil, since everyone was bundled under the mysterious ways of the 'emerging land'. So conventional wisdom really doesn't apply to doing business here. Besides, Mr Mahindra is known to have walked away from the JLR deal when he realized that he might have to end up paying too much. So one can eliminate the possibility of managerial hubris in his operational methods. Besides, M&M is known to operate a strategy of initiate, incubate and cash in on any venture. So, given their past successes, one is tempted to think that some serious thought has gone in to making this decision.
Traditionally observers are averse to change. Mahindra brings to mind tractors. We can imagine the Tatas to be everywhere from telecom to steel to autos to IT. But imagining another global conglomerate spanning autos, IT, aeroplanes and more is tough. Come to think of it, it really isn't a highly unrelated diversification. Although capital intensive, they are moving from one kind of autos to another - in a broad sense. So, I guess we need to watch M&M for a year and see whether Mr Mahindra is a calculative businessman, or whether M&M has displayed classic irrational exuberance. In the same breath, another thing to watch out for is Bajaj. Many spoke of their plan of hiving off the scooters in favor of motorcycles as being flawed. They said why kill the goose that laid golden eggs in favor of an unknown swan? In both these cases, the business leaders have shown immense guts, believing the fact that fortune favors the brave. Whether this tenet holds in business, especially in Indian business in the wake of a fragile, just improving economy is what we need to wait and watch.