FDI FII DISINVESTMENT

transcript

FOREIGN DIRECT INVESTMENTFOREIGN INSTITUTIONAL INVESTORS

FDI FIIDISINV ESTMENT

Screen clipping taken: 1/26/2014 11:40 PM

Screen clipping taken: 1/26/2014 11:43 PM

Suppose a foreign (US) company wants to invest in India.

How can they do it ?

INVESTMENT

The company has 2 options. They are: FDI & FII.

The concept of FDI

RAY ENTERPRISES LTD.

But RE LTD. wants to investIn India for the expansion of their business.

Parent country

Ray Enterprises Ltd.manufactures & sells products in the US.Thus, it operates in the US.

INVESTMENT

So, RE Ltd., the parent co. from US will open a subsidiary ie. a company called RE India Pvt/Ltd.

Hostcountry

Thus, RE India Ltd. is now operating in India.

It can start manufacturing & selling goodsto Indians.

RE India Ltd.

Depending on the FDI Limit in the respective

Sector of the Host Country, the company canbe owned partly/fully by the parent co. RE Ltd.

The concept of FII

Individuals

InstitutionsForeign

INVEST

EquityMarket

*If an investor, invests in the Indian Markets buy Buying Debt or Equity Instruments then he is basically investing through the

medium of FII.

It is a Short Term investment made inthe markets of the country.

The concept of FII

Individuals InstitutionsForeign

DebtMarket

DifferencebetweenFDI & FII

Foreign Direct Investment

Foreign Institutional Investor

Leads to productivity (GDP) of the country.

Investment is made in the infrastructure of the country.Investment is of LONG Term nature.

Leads to Job Creation.

Leads to increase in the Capital (Money) in the Country. But Not GDP.

Investment is in the markets of the country.

Investment is of SHORT Term nature.

Does not lead to Job Creation, But increases Wealth in the Country.

FDI v/sFII

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14*

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

4,0296,130 5,035 4,322

6,0518,961

22,836

34,847

41,873

37,74534,847

46,566

36,860

11,709

YEAR WISE DISTRIBUTION OF FDI INFLOWSA

+ 146 %

+ 53 %

+ 34 %

- 21 %

*Data on FDI from the year 2000-01 to 2013-14 (July, 2013)

+ 52% - 18 % - 14 % + 40 %+ 48 %

+ 20 % - 10 %

- 08 %

TOP INVESTING COUNTRIES (FDI)

MAURITIUS351,754, 38%

SINGAPORE; 102585; 11%

UNITED KINGDOM; 80874; 9%

JAPAN; 71433; 8%

USA; 53013; 6%

NETHERLANDS; 45364; 5%

CYPRUS; 33133; 4%

GERMANY; 28377; 3%

FRANCE; 17503; 2%

UAE; 11647; 1%

COUNTRIES NOT INDICATED, 141129, 15%

STATE WISE FDI DISTRIBUTION

REGIONS NOTINDICATED

MAHARASHTRA, DADRAHAVELI, DAMAN & DIU NEW DELHI & NCR

TAMIL NADU, PONDICHERRY KARNATAKA GUJRAT ANDHRA PRADESH

WEST BENGAL, SIKKIM, A & N

PUNJAB, HARYANA,CHANDIGARH

MADHYA PRADESH,CHATTISGARH

GOA RAJASTHAN UTTAR PRADESH

32 %301,553 cr.

18 %172,509 cr.

06 %58,397 cr.

06 %53,251 cr.

04 %40,469 cr.

04 %38,551 cr.

01 %11,098 cr.

01 %6,654 cr. 0.4 %

3,597 cr.0.4 %

3,551 cr.0.2 %1,665 cr.

26 %240,673 cr.

SECTOR WISE FDI LIMITS

100 %TELECOMMUNICATIONS

COURIER SERVICESASSET RECONSTRUCTION

ADVERTISING

SINGLE BRAND RETAIL

DRUGS & PHARMACEUTICALS

AIR TRANSPORT - DOMESTIC

ELECTRICITY

AGRICULTUREHOUSING & REAL ESTATE

HOTEL & TOURISM

MINING

MASS TRANSIT

MASS RAPID TRANSPORT SYSTEMS

OIL EXPLORATION

PETROLEUM PRODUCT MARKETING

PETROLEUM REFINING

PETROLEUM PIPELINE

SPECIAL ECONOMIC ZONES

POLLUTION CONTROL & MANAGEMENT

ROAD, HIGHWAYS, PORTS

SECTOR WISE FDI LIMITS

74 %CREDIT INFORMATION & RATING

DIRECT TO HOME

SATELLITESAIRPORTS

COAL & LIGNITE

BROADCASTING

49 %AVIATION (INTERNATIONAL)

TEA PLANTATION STOCK EXCHANGES

MULTI BRAND RETAIL

INSURANCE DEPOSITORIES DEFENCE PRODUCTION

TRADINGPOWER EXCHANGES 51 %

Not much known fact

Every $ 1 out of 5 dollars, received in the form of

FDI, goes back as a charge for patents, rotaries, copyrights. etc.

SECTORS ATTRACTING HIGEST FDI INFLOWS

1.SERVICES SECTOR(BANKING, INSURANC, NON-BANKING,COURIER, RESEARCH & DEVELOPMENT, OUTSOURCING, TESTING & ANALYSIS, etc.

$ 178,046 million

2. CONSTRUCTION DEVELOPMENT(TOWNSHIPS, HOUSING, BUILTUP INFRASTRUCTURE, URBAN-RURAL DEVELOPMENT etc.)

$ 103,141 million

3. TELECOMMUNICATIONS(CELLULAR MOBILE, TELEPHONE SERVICES etc.)

06 %$ 58,798 million

$ 54,019 million

4. COMPUTER SOFTWARE & HARDWARE(INFORMATION TECHNOLOGY, IT ENABLED SERVICES etc.)

3. DRUGS & PHARMACEUTICALS(HEALTHCARE SECTOR)

$ 54,333 million

4. CHEMICALS INDUSTRY(INDUSTRIAL CHEMICALS, LIFE SCIENCES,CONSUMER PRODUCTS, SPECIALITY CHEMICALS, etc.)

$ 42,567 million

5. AUTOMOBILE INDUSTRY(CARS, BIKES, HEAVY DUTY VEHICLES etc.)$ 42,246

million

8. POWRER GENERATION(ELECTRICITY PRODUCTION, DISTRIBUTION)

$ 37,336 million

04 %*50 0THER SECTORS CONSTITUTE THE REMAINING 40% OF FDI INFLOWS

FDI IS PROHIBITTED IN THESE SECTORS

TRANSFERABLE DEVELOPMENT

RIGHTS

ATOMIC ENERGY

GAMBELLING & BETTING BUSINESS

LOTTERY BUSINESS

*Data on FII from the year 2000-01 to 2013-14 (July, 2013)

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

EQUITY 10270 8072 2527 39960 44123 48801 25236 53404 -47706 110221 110121 43738 140033 41427

DEBT -273 690 162 5805 1759 -7334 5605 12775 1895 32438 36317 49988 28334 -68882

TOTAL 9933 8763 2689 45765 45881 41467 30840 66179 -45811 142658 146438 93726 168367 -27455-75000

-25000

125000

175000

YEAR WISE FII DISTRIBUTION (INPUT)

EQUITY DEBT TOTAL

*Data on FII from the year 2003-04 to 2013-14 (July, 2013)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

BUY AMOUNT

3362.1 29131.11 123867.36 310425.67 575726.72 630623.58 419709.39 612293.57 660079.02 535985.17 589416.24

SELL AMOUNT

3106.29 30328.02 125901.3 309008.9 519075.57 615558.98 428148.93 625267.15 663191.24 492452.11 588877.89

150000

250000

350000

450000

550000

650000

FII BUY/SELL ACTIVITY (LAST TEN YEARS)

BUY AMOUNT SELL AMOUNT

TOP FII STAKES

FII FAVOURITES*THESE COMPANIES HAVE THE LARGEST FII STAKES :

1. HDFC 74.25 %

2. ICICI BANK 67.55 %

3. INFOSYS 56.34 %

4. INDUSIND BANK 53.47

5. JAIN IRRIGATION 52.44 %

6. HDFC BANK 51.92 %

7. IDFC 51.39 %

8. SHRIRAM TRANSPORT

49.72 %

9. Dr. REDDY’s LABS 49.43 %

10. STRIDES ARCOLAB 49.4 %

11. TATA MOTORS 48.08 %

ICICI BANK

INFOSYS

INDUSIND BANK

JAIN IRRIGATION

HDFC BANK

SHRIRAM TRANSPORT

DR. REDDY'S LABS

STRIDES ARCOLAB

TATA MOTORS

0 10 20 30 40 50 60 70 80

FII STAKE (IN %) *Data as on Dec, 13’

A matter of concern

This last calendar year (2013),

The NYSE’s popular index S&P 500 gave an annual return of around 30 %.

This indicates that the western economies are showing a faster recovery.

The question arises then why would the investors invest over here in India ?

_______________________________________________________________D___I ___S___I___N___V___E___S___T ___M___E___N___T_______________________________________________________________

Government Of India

PSU Which

itwants tosell

Reducestake

It does that through the process of disinvestmentIt is done by both Central as well as State Governments.

The other side of Disinvestment :

Government Of India

Owns Stake

in aPrivatefirm

Which it wants to

Sell Reduce

Government has stake

is also called Disinvestmentin these companies (example)

*Data on Disinvestment In India

Year TARGETED VALUE

ACTUAL VALUE

1991-92 2500 3038

1992-93 2500 1913

1993-94 3500 NIL

1994-95 4000 4843

1995-96 7000 169

1996-97 5000 380

1997-98 4800 910

1998-99 5000 5371

1999-00 10000 1860

2000-01 10000 1871

2001-02 12000 5658

2002-03 12000 3368

Year TARGETED VALUE

ACTUAL VALUE

2003-04 14500 15547

2004-05 4000 2765

2005-06 NIL 1570

2006-07 NIL NIL

2007-08 NIL 4181

2008-09 NIL NIL

2009-10 NIL 23553

2010-11 40000 22144

2011-12 40000 13894

2012-13 30000 23956

2013-14 40000 831

Rs. (in crores)

Disinvested Companies

National Buildings ConstructionCorporation Ltd.

Oil & Natural GasCorporation Ltd.

Coal India Ltd. Power FinanceCorporation Ltd.

National Thermal Power Corporation Ltd.

National Mineral DevelopmentCorporation Ltd.

Rural Electrification Corporation Ltd.

FDI FII DISINVESTMENT

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