UNTIL liberalisation in 1991, the travel schedules of Indian executives often revolved around treks to Delhi to beg officials for access to hard currency and permission to import equipment. These days the country's corporate warriors talk of being on the road in Africa for three weeks of every month, of trips to factories in Wales, of meeting the troops in South Korea and of crossing America to talk to car-dealers.

The rapid globalisation of Indian firms owes much to takeovers. Cross-border deals worth $129 billion over the past decade include monsters such as Bharti Airtel's purchase of the African assets of Zain, a mobile-telecoms firm, and the Tata Group's purchases of Corus, a steelmaker, and Jaguar Land Rover (JLR), a carmaker. Those deals thrilled Indian patriots and transformed the reputation of Indian firms abroad. Some cheerleaders even suggested that shrewd Indian companies, thanks to their willingness to invest for the long term, might defy the first rule of corporate finance: that takeovers routinely destroy value for the purchaser.

Now that the dust has settled, it is possible to take a more sober view. The economy has soured at home and abroad, making life tougher for those businesses that took the plunge. And with hindsight claims that India Inc was taking over the world look daft. Over the past decade India's share of global cross-border deals by value has been a slender 1.4% (see chart), and over the past five years only 1.9%, about the same as buyers from Brazil and Russia, and well below firms from China (including Hong Kong), whose share has been 6.2% since 2007. There is a sneaking suspicion that the structures of some Indian firms—with fiddly holding chains and dominant shareholders who dislike issuing equity—are too convoluted and puny to handle any more large foreign deals. And Indian acquisitions have sometimes failed to make decent returns on capital. This is the barrier that generations of cross-border buyers have crashed into. The Japanese in the 1980s, Iberian firms in Latin America in the 1990s and 2000s, private-equity and banking types before the 2008 crash and most recently Chinese firms mopping up natural resources—all have struggled. To succeed it is not enough to run the acquired firm well. It must also be bought for a sane price. The Economist has examined the four largest deals for which enough information is available. The first test is whether gross operating profits—or “EBITDA”—have risen (see table). There has been one triumph; JLR, where earnings have soared despite a near-death experience after the 2008 crash. A chunk of the recovery is due to the fall of the pound: JLR's plants are mainly in Britain, though it sells largely in other countries. But that is not the whole story. Under Tata's ownership JLR has also launched a killer product, the Range Rover Evoque, and cracked emerging markets, not least China.

After a slump in 2008-09, profits have also risen smartly at Novelis, a North American aluminium firm bought in 2007 by Hindalco (part of Aditya Birla, India's third-largest group by sales) and beaten into shape since. The largest deal, Tata Steel's $13.3 billion acquisition of Corus, an Anglo-Dutch steel firm, has not fared so well. Gross operating profit this financial year may be two-thirds lower than in 2006, just before the takeover was announced after a bidding war with a Brazilian firm. Tata has cut jobs, closed factories, reinvested in new plant and rejigged products. But it sells most of its output to depressed Europe, while the costs of the iron ore and coal it uses to make steel are high. As with many steelmakers, gross operating margins were dire last quarter; a small loss was booked. With more restructuring Tata aims to hit 10% in several years' time (and double that if the economy booms again). It must hope to avoid the fate of old Corus, which failed to make solid profits over the cycle despite valiant efforts. The most recent deal, Bharti Airtel's $10.7 billion purchase of Zain, has suffered: profits have fallen by 5%. Zain's earnings seem to have been fluffed up for auction; they fell after Bharti announced the deal. The firm has been busily rebranding its business in the 16 African countries where it operates, investing in new kit, outsourcing operations (for which it is famous at home) and trying to win market share. It aims to double gross operating profit by next year—an unrealistic goal. With middling market shares in many countries, Zain may never have top-notch margins. Still, profits should soon bounce back to their level before the deal and beyond.

Not measuring up Two of the takeovers have seen profits rise, but this is only half the battle. It is easy to lose money by paying too much for a growing firm. Return on capital is the second test. Both Corus and Zain look poor when compared with profits today. Kumar Mangalam Birla, the head of Aditya Birla group, insists that Novelis has done shareholders proud and notes that his group extracted a $1.7 billion dividend from the aluminium firm last year, paid for, private-equity style, with debt. But on conventional measures Novelis looks likely to make an 8% return on its $6.2 billion price in the year to March 2012, probably a bit below its cost of capital and five years after the deal was launched. That is mediocre. Judged by return on capital, only JLR seems to have generated clear value so far. These four deals account for a quarter of India's cross-border activity over the past half-decade. For the long tail of other deals, returns are also mixed. GMR Infrastructure sold and booked a loss on its $1.1 billion investment in Intergen, an American electricity generator. Crompton Greaves, an engineering outfit, has had a tricky time after acquiring a series of firms in Europe. What is the case for the defence? One argument is that returns on capital don't matter. Japanese firms made this argument as they hoovered up Californian golf courses in the 1980s. History shows they were kidding themselves. Another defence is that profits will leap. They will certainly rise, partly thanks to the healthy investments that all four firms are making.

Novelis is skewing its activity towards emerging markets, as JLR already has, by developing new plants in South Korea and Brazil. Corus has made a start by supplying rails to Chennai's new metro. Bharti's African business is likely to grow quite fast. Yet the capital invested has been tied up for so long that modest extra profits five or six years after a deal are unlikely to vindicate it. As for Zain and Corus, even if they eventually hit their targets for a surge in gross operating profits, return on capital would in both cases still be a lacklustre 7-8%.

The third defence is that there are fuzzy benefits, such as a transfer of skills or products to the rest of the acquiring group, that cannot be captured by numbers. Perhaps, but the striking thing about these deals is that, with the exception of Zain, most of the acquired firms still seem largely self-contained with relatively little integration with the Indian parents. A softly-softly approach was probably sensible, but may mean losing out on synergies.

The final defence is that some Indian deals suffered from bad luck. The most active period was between 2006 and 2008, just before the crash in the West, which sent profits tumbling. There is something to this. Yet many deals were creatures of the boom, involving Indian firms with relatively modest cash flows and fiddly structures buying large targets often with money borrowed cheaply from frothy capital markets. Without the crash profits might be higher, but without the boom that created the crash some deals would not have happened. The same is true of many previous bouts of takeovers.

Is India Inc's rush abroad over? The worldwide fashion for cross-border deals is quite recent, coinciding with the deregulation of finance in the 1980s. Before then multinationals were often built shop by shop, factory by factory. With finance beset by new rules and protectionism stirring, the most important trend may be the organic expansion of Indian firms by exporting and building operations on the ground, from technology to motorbikes. Huawei, a Chinese telecoms-equipment firm, became a giant this way. Some Indian companies will doubtless follow.

Time for some spinach

Smaller, safer takeovers continue. In 2011 the Aditya Birla Group got back in the saddle, paying $875m for Columbian Chemicals, an American maker of carbon black, an ingredient used in tyremaking. In late 2010 Mahindra & Mahindra bought Ssangyong, a Korean carmaker, out of bankruptcy. Even since the start of 2012 there have been 15 deals, all tiddlers.

But to do more jumbo deals in a tougher world, Indian firms need to tackle a glaring area of weakness. This is their complex structures, which mean cash flows are spread thinly, and their dislike of issuing equity for fear of diluting their controlling shareholders. Both factors combined make it hard to marshal resources without resorting to risky levels of debt. India's second-biggest group, Reliance Industries, scores well on the first count, and has the financial firepower to spend perhaps $15 billion safely. But few others do. On February 25th Vedanta, a London-listed natural-resource firm with assets mainly in India, launched an operation to merge its domestic units and clear up a sprawling empire. More firms need to do the same.

Since 1900 multinational business activity has mirrored, with a bit of a lag, countries' economic clout. British firms once dominated; then American ones. On this measure India Inc has far to go. But the age of middleweight Indian firms using euphoric capital markets to make giant leaps abroad may have passed. To punch their weight in the world and make money in the process, they will have to be more restrained abroad and bolder at restructuring their organisations at home.