There was much heartburn at the way the MNCs were treating their Indian partners, which had ostensibly outlived their utility of wading through the maze of regulation and providing local expertise.
Even as joint ventures continue to fall apart, the chagrin appears to have been replaced by a sense of inevitability. The current thinking is that mostly those joint ventures will continue which are necessitated by the government's norms, such as in the areas of insurance, retail and telecommunications.
"There are two groups with ambitions. There will be a situation in which the ambitions of the partners would prove to be too large to be accommodated in one company," says Jayesh Desai, national director for transaction advisory services with Ernst & Young.
After nearly a year of murmurs that JM Financial and Morgan Stanley would go separate ways, they have, joined the swelling ranks of joint ventures that have fallen apart.
With this, each of the ventures that dominated investment banking space till December 2005 -- the other two being DSP Merrill Lynch and Kotak Mahindra-Goldman Sachs -- have come apart.
The break-ups have come to be seen as the continuation of a trend that started at the turn of the century, as multinationals became acclimatised to India and the foreigners became familiar with the regulatory framework and the local conditions.
A study by McKinsey, the consultancy, says that 22 of the 25 major joint ventures forged between 1993 and 2003 have failed.
Since then, 50 more are estimated to have fallen apart including Ford-Kotak Primus, Concor-IDF, L&T-Netra, Modi Xerox, RPG Dairyfarm, Tata Honeywell, HCL-Perot, Mahindra-Ford, Benetton DCM, Allied Domeck-Clan Morgan, Daikin Shriram, Apollo-Michelin
and AMP Sanmar.
ModiCorp chief B K Modi, who at one time had 12 cross-border joint ventures, now has none.
"If a joint venture is not creating value, the partners should go separate ways. There is nothing emotional about it," says an analyst.
Adds another: "In a way, this is a good sign, as it means that the Indian side has ambitions to become a global player." Joint ventures were the need of the day before 1991, when the government did not allow more than 40 per cent foreign equity in any venture and when many of Modi's ventures were forged. The limit increased to 51 per cent in several sectors after 1991 and up to 100 per cent later on.
Even then, there was a strategic rationale for JVs as the Indian partner provided local expertise, in what was till then an uncharted territory, and claimed to influence government policy. Things changed with the ease in FDI restrictions, steady growth in India's industrial sectors and the not-so-happy fate of some joint ventures.
The success of some foreign companies without an Indian partners -- for instance, the Korean chaebols - gave confidence to others.
In several JVs, the objectives of the partners had become divergent.
Most multinationals look at the long term and focus on market share, instead of short-term profitability. That entails rolling investments, which is not a strong point with the Indian partners.
There have also been other issues. In HCL-Perot, HCL wanted to focus on technologies and Perot on infrastructure and government-related work.
Honeywell, the US-based automation giant, wanted to go solo because it realised that the market had great potential, and demanded more aggression.
In the case of Kotak Mahindra Primus, Ford took a decision globally to finance only Ford cars; the Indian venture was financing all brands.
