- 1. Investment in India Overview NITESH KUMAR PANDEY MBA Wine
Business England
2. Destination India
- Amongst Fastest growing market Economies in the World, @ over
7% p.a. last 4 years
- Liberal FDI Policy Framework FDI up to 100% allowed in most
sectors
- Rationalization of Tax Structure to promote Investment
- High Foreign Exchange Reserves
- Liberal outbound investment
- Entry Routes for Investment in India
3. Foreign Investment in India The Driving Force
- Well diversified Industrial Base
- A large & sophisticated financial Architecture
- A healthy GDP composition
- An acknowledged strength in knowledge driven Industry
4. FDI and Portfolio Flows to IndiaSource: RBI,2007 5. Investor
Confidence
- India Ranked2 ndby AT Kearney's Foreign Direct Investment
Confidence Index 2007
- Has progressively moved ahead in the rankings; was ranked 15
thin 2003
- Attractive location across all broad sectors especially
Manufacturing and high value-added services industries like
financial services and information technology.
6. Investor Attractiveness Source: 2007 A T KEARNEY 7. Sectors
Attracting Highest FDI Equity Flows 8. Advantage India
- One of the Largest Free Market Democracies in the world
- Unparalleled resource of educated, hard-working, skilled and
ambitious workforce
- Youngest workforce in the world
- Working age population estimated to rise 70% of the total
population by 2030
- 70 million new entrants to its work force every 5 years
9. Advantage India
- English the language of business in India
- one of the largest Pools of English Speaking Manpower after the
US
- Over 3 million scientific and technical manpower
- Over 2.5 million graduates added to the workforce every
years
- 3 rdlargest pool of educated personnel
- A large and Growing Middle class with per capita income of more
than 1000 US $ p.a.
10. Advantage India
- Amongst the largest and ever growing domestic market
- Sound economic Fundamentals; Stable Economic reform regime
11. M&A Band Wagon
- Frenzied Activity in the field of M&A in recent years
- In 2007 out of Total 348 Cross Border Deals:
- Outbound: 240 ($32.37 billion)
- Inbound: 108 ($15.61billion)
- In First Quarter of 2007 while Inbound FDI flows were at an all
time high they still exceeded by outbound investment
12. Increase in M& A 13. India Inc. Goes Global
- Tata Motors acquired Jaguar & Land Rover for 23
billion
- Tata Steel acquired UK based Corus for $ 8 billion.
- Suzlon Energy Ltd acquired German firm Repower Systems AG for $
1.7 billion.
- United Spirits bought Scotch whisky distiller Whyte &
Mackay for US$ 1.11 billion
- Hindalco acquired Novelis for $ 6 billion
14. Inbound Transactions
- Sistema, Russian Joint Stock Companys acquisition of 74% stake
in Shyam Telelink Telecommunications
- French banking major BNP Paribass acquisition of 45% stake in
financial services firm Sundaram Home Finance for $45.81
million
- Standard Chartered Bank bought 49% stake for $34.19 million in
UTI Securities and Interpublic Group hiked its stake in Lintas
India to 100% for $100 million
15.
- Fursa Mauritiuss acquisition of 42.63% equity in Gayatri
Starchkem
- UBS Global Managements Acquisition of Standard Chartered Asset
Management Company for $ 117.78 Million
- EMC Corporations Acquisition of Valyd Software Pvt. Ltd.
- Orklas Acquisition of MTR foods for $ 100 Million
16. Indian Overseas Investment
- Favourable Policy framework
-
- Overseas Investment Limit 400% of Net Worth for Companies
Incorporated in India including Subsidiaries of Foreign Co.
-
- Overseas portfolio investment - 50 per cent of Net Worth
-
- RBI approval on case by case basis if in excess of the above
specified limit
17. Funding
-
- Drawal of foreign exchange from an AD;
-
- Capitalization of exports;
-
- Utilization of proceeds of External Commercial Borrowings
(ECBs) / Foreign Currency Convertible Bonds (FCCBs);
-
- Balances held in EEFC account of the Indian party;
-
- Utilization of proceeds of foreign currency funds raised
through ADR / GDR issues.
18. Indias Direct Investment Abroad Source: RBI 2007 19. Entry
RoutesInvesting In India Automatic Route Approval Route General
Permission No Prior Permission Required RBI to be informedwithin 30
days of inflow /issue of shares Discretion Govt. Approval required
Decision generally within4-6 weeks 20. Entry Strategies for Foreign
Investors
- Incorporation of a company (governed by companies Act)
- As a Foreign Company through:
-
- Liaison office/Representative office
-
- Branch Office foreign company
- As an Indian company through:
21. Joint Ventures As An Entry Strategy
- JVS regulated by Policies and Laws governing FDI
- Two Tier Approval Mechanism for JVS:
- If the Foreign Partner has entered into JV in thesame
fieldbefore then NOC of the previous JV partner and approval of the
Government also required
22. Joint Ventures Contd
- Same Fieldmay be defined as the 4 digit National Industrial
Classification (NIC) Code
- If the foreign investor has collaboration for the manufacture
of tarpaulin Code 268.3, he can invest in the manufacture of
rubberized cloth Code 268.2 as there is no restriction to enter
into JVs in allied fields. The restriction shall apply to any item
whose code NIC code is 268.2.
23. Joint Ventures Contd
- A Conflict of Interest clause advisable in the JV/Collaboration
agreement in case one of the Partners to the JV wants to set up
another JV or wholly owned subsidiary in thesame field
24. Joint Ventures Contd
- The Following are exempted from the restriction of entering
into JV in the same field:
- Information Technology sector
- Investments made by multinational financial institutions
- mining sector for the same area/mineral
25. Joint Ventures Contd
- Prior government approval not required in certain cases:
- Investment to be made by venture capital funds is registered
with SEBI
- Existing JV investment is less than 3%
- Existing venture is defunct or sick
26. Remittances
- Determination of sale Price of Shares
- Unlisted Company/Shares Thinly Traded on the Stock
Exchange
- Remittance of Sale Proceeds:
- NOC from Income Tax Authority required
- If the security has not been sold on a recognized stock
exchange then prior approval of the RBI in form TS 1 has been
obtained
27. Regulatory Framework
- Some applicable Indian Laws
28. Competition Law, 2002
-
- Anti-competitive agreements;
-
- Prohibition of abuse of dominant position
-
- Regulation of Combinations including mergers
29. India : Merger Law
- Monopolies and Restrictive Trade Practices Act, 1969
30. New Merger Law
- The Indian law uses the word combinations to cover acquisition
of control, shares, voting rights and assets, and mergers and
amalgamations
- Relevant Sections: 5-6 & 29-32
31. Areas of Concern
- Applicable threshold Limits Based on:
-
-
- Approval of proposal by BOD
-
-
- Execution of agreement/ document
32. Competition proposals
- Mandatory waiting Period for Approval
- Extra Territorial Jurisdiction of CCI
-
- CCI has power to inquire about combinations taking place
outside India
33. Intent of National Security Legislations
-
- Right to Intervene in case of perceived threat to National
Security
-
- Discretionary powers to prevent certain foreign companies from
doing business in the country
34. Foreign Investments & National Security Legislations
- United States- Foreign Investment & National Security Act,
2007 (Exon-Florio Provision)
- European Union- Members are free to regulate International
Mergers (Articles 81-85 EC Treaty regulates Competition)
35. National Security Contd.
- United Kingdom- Enterprises Act 2002
- India- National Security Exception Bill yet to be passed by the
Parliament
36. FDI Policy Sno. SectorSectoral Cap 1. Manufacturing
(Exceptions- Defense products, Products reserved for Small Scale
Sector100% 2. Coal Mining100% 3. Electricity (Generation,
Transmission, Distribution and Power Trading) 100% 4. Roads &
Highways 100% 5. Airport Projects (Greenfield)100% 6. Telecom-
Basic & Cellular, Unified Access Services ISP without Gateway
Infrastructure Provider providing Dark fibre, right of way, duct
space, tower etc.74% 100% 37. FDI Policy 7. Hotels &
Tourism100% 8. Shipping & Ports 100% 9. Industrial Parks 100%
10. Hospitals100% 11. SEZS 100% 38. FDI Policy Prohibited
Sectors
- Agriculture (excluding Floriculture, Horticulture, Development
of seeds, Animal Husbandry, Pisciculture and Cultivation of
vegetables, mushrooms etc. under controlled conditions and services
related to agro and allied sectors) and Plantations (Other than Tea
plantations)
39. Special Economic Zones Fuelling Indias Economic Growth
- FDI-100% permitted under automatic route
- Regulated by the SEZ Act 2005
-
- Engine for economic growth
-
- Development of infrastructure
40. SEZ (Objectives) Contd.
-
- Promotion of Export of Goods & Services
-
- Generation of Employment oppurtunities
-
- minimum possible regulations.
-
- attractive fiscal package
-
- both at the Centre and the State
41. SEZ Procedures
- By Central/State or any other entity
- Minimum Area Requirements for different class of SEZs
- SEZ divided into Processing area (for units) and Non Processing
Area (for supporting infrastructure)
- Single Window Clearance available
42. SEZ Current Statistics
- 496 SEZs Approved after SEZ Act 2005
- 13 Pharmaceuticals and chemical SEZs
- 8 Textile/Apparel/Wool SEZs
- 136 In principle approvals
- 207 SEZs have been notified
43. Incentives: SEZ Developers
- Customs/Excise exemptions
- On export Income for 10 years out of 15
- Exemption from Dividend Distribution Tax
- Exemption from Sales Tax/Service Tax
44. Incentives: SEZ Units
- Duty free import/domestic procurement of goods
- Exemption from minimum alternate tax
- External commercial borrowing by SEZ units up to US $ 500
million in a year without any maturity restriction through
recognized banking channels.
- Exemption from Central Sales Tax/VAT/State Acts & Service
Tax
45. Real Estate Developing Indias Tomorrow
- Amongst the largest employers only after agriculture
- Housing Sector contributes 5% of GDP
46. Real Estate- Growth Potential
- Requirements of housing, commercial and industrial
infrastructure bound to rise
- 367 Million Sq. Ft. of additional office space needed by
2012-13 ( Estimated by Ernst & young)
- Indian Ministry of Tourism forecasted requirements of 2.9 and
6.6 Million hotel rooms to meet the tourism and business by 2010
and 2020.
- Fast growing Medical tourism will become US$2 billion industry
by 2012
- Asian Development Bank estimates requirements of 10 million
units by 2030 and will require huge investment in Health Services
sector
47. Real Estate- FDI Policy
- FDI not permitted in Business of buying & selling
property
- FDI up to 100% under the automatic route in townships, housing,
built-up infrastructure and construction-development projects
including housing, commercial premises, hotels, resorts, hospitals,
educational institutions, recreational facilities, city and
regional level infrastructure) subject to:
- Minimum Area requirements
- Minimum Capitalization requirement
- Divestment clause i.e. No repatriation before 3 years
48. Real Estate Developers- Incentives
- Tax exemptions up to 100% on profits derived by an
undertaking
- Developing/operating/maintaining Industrial Parks
- Developing & Building Housing Projects
- Developing/operating/maintaining SEZs
- Constructing Hotels & Hospitals in Tier 2 cities
49. Real Estate-Foreign Players in India Investor Country Emmar
Group U.A.E Kontur Bintang/ Westport Malaysia Singapore Housing
Board Singapore Keppel LandSingapore Salim Group Indonesia Lee Kim
Tah Holdings Singapore 50. Retail Sector
- Amongst the largest employers in the country at par with Real
Estate
- Amongst the highest outlet density in the world with around 12
mn Outlets
- Largely unorganized; Large no. of local players;
- Scope of Market consolidation
51. FDI in Retail
- FDI not allowed in Multi-Brand Retail
- 100% permitted through the Automatic route in Wholesale Cash
& Carry operations
- 51% in Single Brand Retailing
- Product to be single brand only
- Should be sold under same Brand Internationally
- Covers only Products Branded during Manufacturing
52. Retail Sector - Foreign Players Player Retail Activity Wal
MartWhole Sale Cash & Carry Operations Marks & Spencer
Single Brand Retail Nike Single Brand Retail Christian Dior Single
Brand Retail Jimmy Choo Single Brand Retail French ConnectionSingle
Brand Retail Lee Cooper Single Brand Retail 53. Areas of
Concern
- Method of escaping Tax Liability
- Tax Avoidance hence Illegal
54. Judicial System
- Robust, well-developed legal and administrative system
- Derived from the Common Law System
- Arbitration Preferred mode of settlement
- International Commercial Arbitration Possible
- Strong Intellectual Property laws
55. Investing in India
- It is advisable to have a thorough Due Diligence done before
investing
- It is advisable to have a clearly worded non-compete clause if
entering into a JV
- Dispute Resolution clause
- Must be clearly worded in terms of Governing Law, Jurisdiction,
Mode of Dispute Resolution
56. Investing in Indiacontd.
- Intellectual Property Clause
- - To protect IP rights from Infringement
57. THANK YOU