30
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.
INDIA
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
Or
InstitutionsForeign
INVEST
Debt
Or
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*
0
5,000
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
MO
UN
T I
N M
ILLIO
N $
+ 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.
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
FILMS
MINING
MASS TRANSIT
MASS RAPID TRANSPORT SYSTEMS
NBFCs
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
26 %
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
19 %
SECTORS ATTRACTING HIGEST FDI INFLOWS
2. CONSTRUCTION DEVELOPMENT(TOWNSHIPS, HOUSING, BUILTUP INFRASTRUCTURE, URBAN-RURAL DEVELOPMENT etc.)
11 %
$ 103,141 million
SECTORS ATTRACTING HIGEST FDI INFLOWS
3. TELECOMMUNICATIONS(CELLULAR MOBILE, TELEPHONE SERVICES etc.)
06 %$ 58,798 million
$ 54,019 million
SECTORS ATTRACTING HIGEST FDI INFLOWS
4. COMPUTER SOFTWARE & HARDWARE(INFORMATION TECHNOLOGY, IT ENABLED SERVICES etc.)
06 %
SECTORS ATTRACTING HIGEST FDI INFLOWS
3. DRUGS & PHARMACEUTICALS(HEALTHCARE SECTOR)
$ 54,333 million
06 %
SECTORS ATTRACTING HIGEST FDI INFLOWS
4. CHEMICALS INDUSTRY(INDUSTRIAL CHEMICALS, LIFE SCIENCES,CONSUMER PRODUCTS, SPECIALITY CHEMICALS, etc.)
$ 42,567 million
05 %
SECTORS ATTRACTING HIGEST FDI INFLOWS
5. AUTOMOBILE INDUSTRY(CARS, BIKES, HEAVY DUTY VEHICLES etc.)$ 42,246
million
04 %
SECTORS ATTRACTING HIGEST FDI INFLOWS
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
25000
75000
125000
175000
YEAR WISE FII DISTRIBUTION (INPUT)
EQUITY DEBT TOTAL
YEARS
Rs.
(IN
CR
OR
ES
)
*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
50000
150000
250000
350000
450000
550000
650000
FII BUY/SELL ACTIVITY (LAST TEN YEARS)
BUY AMOUNT SELL AMOUNT
YEARS
Rs.
(IN
CR
OR
ES
)
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 %
HDFC
ICICI BANK
INFOSYS
INDUSIND BANK
JAIN IRRIGATION
HDFC BANK
IDFC
SHRIRAM TRANSPORT
DR. REDDY'S LABS
STRIDES ARCOLAB
TATA MOTORS
0 10 20 30 40 50 60 70 80
74.25
67.55
56.34
53.47
52.44
51.92
51.39
49.72
49.43
49.4
48.08
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
owns
PSU Which
itwants tosell
Reducestake
Or
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
Or
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.
