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Indian FDI: Trends and Opportunities by Chris Knight Global Commercial Director fDi Intelligence, Financial Times Ltd
Indian FDI: Trends and Opportunities
by
Chris Knight
Global Commercial Director
fDi Intelligence, Financial Times Ltd
About fDi Intelligence
• fDi Intelligence, a division of the Financial Times Ltd, is the largest FDI COE globally with over 50 FDI staff.
• Specialising in all areas relating to FDI and investment promotion:-
1. Location advertising to generate brand awareness;
2. Industry-leading intelligence tools to develop FDI strategies and identify potential investors;
3. Tailored FDI events and investor roundtables to meet target companies and generate business leads; and
4. Bespoke research studies to develop and implement investment promotion strategy
About WAVTEQ
• Specialist FDI consulting firm established in 2010 as an FT spin-off
• Offices across Asia, Europe and North America with 50 FDI consultants
• Key services:
1. Lead Generation: LG campaigns, road shows, country desk and in-market representation. Secured >$5bn FDI since 2014 for IPA clients
2. FDI Consulting: Strategy, Marketing Materials, Training, CRM systems, etc.
3. FDI Products: world’s leading developer of FDI tools & data products
Publications portal
WAVTEQ recent Lead Generation clients
HOW IMPORTANT IS INDIAN FDI?
Source: WAVTEQ
Fastest growing source countries for FDI
2015 (FDI projects) 1. Belgium (29%) 2. Luxembourg (28%) 3. India (27.5%) 4. Israel (25%) 5. Malaysia (20%) 6. Thailand (18%) 7. Denmark (16.5%) 8. China (15.4%) 9. Singapore (7%) 10. France (6.5%)
Source: www.fdimarkets.com
India has been the fastest growing major source country for greenfield FDI in the world
FDI forecasts top 25 source countries (greenfield FDI, 2016-20, $bn)
28,281 30,358 35,294 36,531 40,872 44,416 44,858
55,636 60,817 68,070 73,478 74,393
93,917 98,488 99,702 102,313 106,468
130,330 155,393 160,690
213,969 217,724
247,404 320,604
620,512
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000
Saudi Arabia Sweden
Luxembourg Denmark Thailand Malaysia Australia
Russia Netherlands Switzerland
Taiwan Italy
Spain India
Singapore UAE
Canada South Korea
France Hong Kong
UK Germany
Japan China
United States
Excludes retail Source: FT-WAVTEQ FDI Forecasting Model
• 11 of top 25 are emerging markets
• Indian ranked 12th globally for greenfield capex forecast to 2020
FDI from India
Source: fDi Markets
FDI from India – leading destinations
Source: fDi Markets
India’s FDI into the UK
Source: fDi Markets
India’s FDI by sector: # greenfield projects (2012-Aug. 2016)
Source: fDi Markets
India’s FDI by sector: greenfield jobs (2012-Aug. 2016)
Source: fDi Markets
Recent projects into UK
Source: fDi Markets
Recent projects into UK
Source: fDi Markets
Recent projects into UK
Source: fDi Markets
City analysis
• Mumbai: The three major sectors for outward FDI are Business Services, Financial Services and Software & IT which together account for 58% of FDI projects from Mumbai. Automotive OEM, Chemicals and Consumer Products also have significant FDI, but investment is concentrated in a relatively small number of companies; Emerging sectors from city include; Fintech, Digital Media, Consumer Products
• Bangalore: Software & IT is the leading sector for FDI, accounting for over half (54%) of FDI projects from Bangalore. Business Services is the next most important sector, followed by Financial Services and Metals. However, the latter two sectors have FDI concentrated in a relatively small number companies; Emerging sectors: Analytics, Consumer Internet, Enterprise Software
• New Delhi: Business Services and Communications are the key sectors for outward FDI, accounting for 39% of all FDI projects from New Delhi; Emerging sectors: Fintech, Enterprise Software, Trading & Logistics, Consumer Products
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City analysis
• Gurgaon: Software & IT is the major sector for outward FDI, accounting for 38% of FDI projects. Other key sectors for FDI are Business Services and Rubber although FDI is concentrated in a small number of companies;
• Chennai: Software & IT is the most important sector for FDI, accounting for 28% of FDI projects from Chennai. Healthcare is also an important sector for FDI, but with investment highly concentrated;
• Hyderabad: Software & IT is the leading sector for FDI from Hyderabad, accounting for 41% of the city’s total outward FDI. Pharmaceuticals has a relatively low number of projects but by quite a few companies indicating potential to grow; and
• Pune: Software & IT and Industrial Machinery are the leading sectors for outward FDI in Pune, accounting for 65% of the city’s total outward FDI.
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City analysis: key outward FDI clusters by city
IT BPS FS LS Creative Industry
Mumbai ✔ ✔ ✔ ✔ ✔ ✔
Bangalore ✔ ✔ ✔ ✔
New Delhi ✔ ✔ ✔ ✔
Gurgaon ✔ ✔ ✔
Chennai ✔ ✔
Hyderabad ✔ ✔
Pune ✔ ✔
Source: WAVTEQ
Impact of Brexit on Indian FDI in UK
• In the lead up to the EU referendum, Indian companies were outspoken in their desire for the UK to stay within the bloc and stressed the importance of the UK’s position as a platform for the European market to its investment attractiveness.
• In the period January – August 2016 Indian companies have invested $172m in the UK, compared to $917m in the same period last year.
• In terms of project numbers – there have only been 16 in the UK this year compared to 29 in the same period last year.
• More interestingly, this is in a period when overall Indian outward investment has been increasing from $8.7bn last year to a huge $16bn already this year (although project numbers have decreased)
Impact of Brexit on Indian FDI in UK
• Indian companies invest in the UK due to technological strength and domestic market size in key sectors for Indian FDI, openness to M&A, the English language and strong, historical ties between the countries
• Indian companies have two major concerns with Brexit:
1. Economic & political uncertainty (reduced growth, FX risks, government policy to FDI, which may become more restrictive)
2. Movement of people (from EU and India) especially in tech & services
• Indian companies may look more towards partnering and joint ventures with UK-based companies to access the UK market without taking as big a financial risk as an M&A or greenfield investment
• There may also be more opportunistic investors who are encouraged to invest in the UK to take advantage of lower asset prices
• We see less risk to Indian FDI relocating to EU countries
• Leaving the EU may benefit Indian FDI in other regions of the UK as London loses some of its appeal as the gateway to Europe
• We also see huge export opportunities for UK-based firms in India
HOW TO ATTRACT INDIAN FDI?
This section provided by WAVTEQ India
www.wavteq.com
Identify sector opportunities
• India is in the world’s top five source countries for Greenfield FDI in the following sectors:
1. Software & IT
2. Business Services
3. Automotive (following major M&A, esp. in UK)
4. Pharmaceuticals
• Financial Services has also been a major sector for outward FDI, but has declined in the last 2 years (as has global FDI in the sector)
Software & IT
• The sector has been the leading sector for FDI from India in every year in the last decade
• Accounts for one-fifth of Indian outward FDI, incl. in 2016
• Key target subsectors in Software & IT, include:
– Consumer Internet
– Fintech
– Big Data
– Enterprise Software products
– App Development
– Digital Media
– Analytics & Software as Service
• Many companies are well capitalised start-ups and SMEs, with leadership teams from large Indian and US corporates
Business & Professional Services
• Business Services is the 2nd largest sector for Indian outward FDI projects
• Accounts for 15% of Indian FDI each year, incl. in 2016
• Business and professional services firms are looking to add local delivery strength and leverage this experience to garner new clientele
• While Indian BPO companies are very well known other key subsectors to target include:
– Legal firms
– Market research
– Executive recruitment
– Travel & tourism services
– Venture Capital firms
– M&A advisors & globalisation consultants
Advanced manufacturing
• The Indian government aims to double outbound shipments to $900 billion over the next five years
• The key sectors from India to target for FDI include:
– Pharmaceuticals
– Automotive components
– Metals
– Consumer products
– Industrial machinery
– Chemicals
Understand the FDI motives
• As Indian companies are typically data driven, the value proposition should include information on:
1. Workforce & wages
2. Education with emphasis on renowned Universities
3. High Skill migration statistics
4. Immigration procedures for skilled talent from India.
5. Cost of living
6. Key Business locations comparison
• Indian companies are also incentives driven, so information on tax and incentives should be provided as part of the initial proposition
Size of the Indian market
There are over 12 million Indian companies:
• Manufacturing: over 1 million companies
• Business Services: nearly half a million companies
• ICT: over 100,000 companies
• Financial Services: over 300,000 companies
• Transportation & Storage: over 300,000 companies
• Media & Entertainment: nearly 50,000 companies
• Life sciences: over 160,000 companies
• Travel, Recreation & Leisure: over 160,000 companies
fDi Markets from fDi Intelligence has information on over 2,600 actively investing Indian companies and over 1,000 leads of Indian companies considering FDI
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How to identify target companies from the 12m pool?
• Understand your key selling points and the key sectors
• Identify matching active and potential investors
– The largest Indian companies with the financial capacity and business need for FDI, but which have not yet invested your country
– Indian companies with a previous track record in FDI, including SME companies
– Tracking peer companies of already established companies and target the peer companies as future hot prospects for the region
– Targeting high growth and high R&D spending companies which are metrics closely correlated with FDI;
– With the world’s second largest technology cluster, monitor new start-ups and funding rounds
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How to identify and track leads?
• Monitoring specific news/alerts on the Target Company i.e. fund raising, news on increased target region focus, and appointment of key/new personnel to increase sales or to increase focus on the target region
• Tracking new client wins of the company in the target region
• Patent registrations by the company in the target geography
• Raising your profile as a business location to passive investors by consistent follow up and providing news or announcements relevant to their sector
• Attending key flagship industry events in India to build on an existing relationship with an active investor and to ensure new investors reach out to you whenever they are thinking of expanding in the target region
Indian companies considering investing abroad
Source: fDi Markets
Indian companies considering investing abroad
Source: fDi Markets
Indian companies considering investing abroad
Source: fDi Markets
How to engage with Indian companies?
• Engage the decision makers in India and the project committees formed for an expansion. This often can be done electronically up to project stage (esp. for tech firms)
• Since the Geography Head plays a vital role in an expansion decision in their respective regions, you need to be in close contact with them as well
• SVP of Corporate Strategy, CFO, CEO and Regional Heads are key targets. Middle Management is less important to target in India compared to other countries
• Once you get more clarity on the project and its timelines, meeting them in person to qualify the project extensively is recommended
• Indian companies are typically data-driven and will request detailed information and often location comparisons
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One97 is establishing a 100 person R&D centre in Canada, secured by WAVTEQ • WAVTEQ tracked that the company had raised $200
million from Alibaba Group’s finance arm, Ant Financial and from Chairman Emeritus of the TATA Group, Mr. Ratan Tata
• We approached the company in August 2014 to understand how they will use the funding to expand overseas
• We identified the need for increased R&D in Big Data
• WAVTEQ provided convincing information on the talent pool in the Toronto/ Waterloo area, the competitive advantages of investing in Ontario/Canada, and information on R&D incentives
• We facilitated site visits to Canada and coordinated closely with the HQ in India to secure the decision to invest
• Within 8 months of initial contact, the company began hiring in Toronto in April 2015 with an initial 50 Software Engineers and Data Scientists ramping up to 100 staff.
The company intends to leverage the Communications & Big data
talent pool in the Toronto and Waterloo regions to build a Data Sciences Innovation Lab to develop technologies that empower the world's fastest growing mobile transaction ecosystem
http://paytmlabs.com/ 35
Example success case: 100 person R&D Centre
Zomato is establishing a $10 million, 50+ job office in Canada, secured by WAVTEQ • WAVTEQ identified Zomato as a high growth tech start-up
with ambitious global expansion plans & successful investment rounds.
• We engaged with the company initially for our client in UK
(they established their first office in London, UK).
• When WAVTEQ was awarded a contract by Invest Ontario in
2014, we checked Zomato’s plans for North America and found out they were looking for a new operation to cover Canada and technical services for the region.
• We positioned Ontario with Zomato, providing detailed benchmarking data and other information on talent and incentives.
• We worked closely with Invest Ontario to arrange a site visit and assisted with all stages of the investment process.
• In less than 12 months, the company announced a major new operation in Toronto which has now been established and is currently being expanded.
Zomato (India), a 650 person tech company with over $50m in raised
capital, announced in in 2014 a $10m, 50 person country and technical office in Toronto, Ontario. WAVTEQ nurtured the investment from start to
finish. Press release: http://www.wavteq.com/article.php?&all_articles=1&a=28
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Example success case: 50 person IT Centre
Sankalp Semiconductors to establish a 20+ person Design Services Centre in Ontario, facilitate and assisted by WAVTEQ.
• Sankalp Semiconductor is an AMS (Analog and Mixed Signal)
semiconductor design service provider.
• WAVTEQ India approached the company in October 2015 to
understand their expansion plans for North America.
• The prospect is planning to set up a Design Engineering Services Centre in Ontario with intention to cater to their
existing clients in Canada. They already have a sales office in Ottawa.
• By end of 2015 they employed 8 full time staff and 5 contractors at their new office in Toronto.
• WAVTEQ India coordinated closely with Sankalp
Semiconductors in India to secure the decision to invest in Ontario.
.
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Example success case: 20 person design Centre
New India country desk service
• We work very closely with WAVTEQ to help clients attract FDI from India and across Asia
• WAVTEQ also represents fDi in Asia
• WAVTEQ’s new Country Desk service provides a cost-effective solution to attract FDI from India and across Asia
Role of intermediaries in FDI
Role of intermediaries in India
• Key intermediary networks in India:
– Management consulting firms specialising in global location strategy and supply chain solutions
– Investment banking firms who assist their clients in raising capital for global expansion
– Law firms representing firms for global IP registrations and global compliance
– Media firms e.g. Fleishman Hillard, Text100 & Six degrees
– Key industry associations
• FICCI: indirect membership of >2.5m companies
• CII: >7,200 members, indirect membership >100,000
• NASSCOM: >1500 members
• iSpirit: think tank for software sector
• FIEO: The Federation of Indian Export Organisations
Role of intermediaries in FDI
Key intermediary types in India
www.fdiprofessionals.com
Role of intermediaries in FDI
Mumbai is the major hub for intermediaries in India
www.fdiprofessionals.com
Role of intermediaries in FDI: Example industry association
www.fdiprofessionals.com
Role of intermediaries in FDI: Example financial services
www.fdiprofessionals.com
For more information please contact me on: Chris Knight Global Commercial Director, fDi Intelligence [email protected] 0207 775 6718
