INVESTMENT IN INDIAN INFRASTRUCTURE SECTOR

AGENDA

• Introduction

• Major Issues and Implications

• PEST Analysis

• Competitor Analysis

• Investment Opportunities

• FDI and Regulatory Environment

• Government Policies and Initiatives

• Tax Environment

• Challenges for Foreign Player

• Business Strategy

• Financial Strategy

• Human Resource Strategy

• Building long term in India

• Conclusion

INTRODUCTION

• MMS Consulting Firm consults in environment scanning, analysis and strategic guideline to invest in India

• A Singapore Firm wants to invest in Indian Infrastructure market

• Infrastructure Industry consist of

– Roadways and Highways

– Power

– Ports and Airports

– Rail

– Electricity

• Indian Economy is booming

• Growing housing and commercial space requirement

INTRODUCTION

• Rising household income

• Booming It and ITES sector

• 100% FDI in construction industry through automatic route

• Retail sector facilitating real estate growth

• Lucrative investment alternative

MAJOR ISSUES AND IMPLICATIONS

• Contract Procedures

• Skilled Manpower Shortage

• Title clearance

• Procedural and legal vulnerability

• Urban Land monopoly

• Debatable Tax status under section 801 (A)

• Infrastructure bottlenecks

PEST ANALYSIS

POLITICAL FACTOR

• SEZ Act to boost infrastructural development

• Cement prices reduced for state infrastructure projects

• FDI Liberalization to Augment Industry growth

• Introduction of REITS

• Legal Framework to be followed

– Building Commencement Certificate:

– Occupation Certificate:

– Brihan Mumbai Corporation [BMC] Developing Plans

– CRZ(Coastal Recovery Zone Rule):

– TDR (Transfer of Development Right):

– National Building code

PEST ANALYSIS

ECONOMICAL FACTORS

• Growth in construction activity stimulating GDP growth

• Rate Hikes Unlikely to slow down growth

SOCIAL FACTORS

• Rising Urbanization to boost Industrial growth

• Green buildings in India

TECHNOLOGICAL FACTORS

• Low technology to Hinder growth

• Construction as per Indian Requirements

• Ready Mix concrete Being Experimented with

• Pre-Structured Concrete Blocks

• Mixture of Cement and Sand

COMPETITOR ANALYSIS

• Larsen & Toubro

• Jaiprakash Associates

• Lanco Infratech

• Reliance Infrastruture

• GMR Group

• Punj Lloyd

• Hindustan Construction Company

• Gammon India

• Simplex Infrastructure

• GVK Power and Infrastructure

• IRB Infrastrucutre

• Shriram EPC

INVESTMENT OPPORTUNITIES

Projected spending from FY07-FY12 in selected infrastructure segments:

• Electricity: US$167 billion

• Railways: US$65 billion

• Road and highways: US$92 billion

• Ports: US$22 billion

• Airports: US$8 billion

• One of the world’s fastest growing economies – and growth expected to continue at 6-7% despite the global downturn

• Few restrictions on foreign direct investment (FDI) for infrastructure projects

• Tax holidays for developers of most types of infrastructure projects, some of which are of limited duration

• Opening up of the infrastructure sector through PPPs

FDI AND REGULATORY ENVIRONMENT

APPROVAL ROUTE – Permission Required

• Existing Airports – beyond 74%

• Atomic Minerals

• In case of joint venture or technology collaboration agreement in the same field

FDI AND REGULATORY ENVIRONMENT

AUTOMATIC ROUTE– Freely Permissible (100%)

• Greenfield airports

• Construction & maintenance of infrastructure like ports, harbors, roads and highways

• Power generation, transmission and distribution and power trading (atomic energy not permitted)

• Mass rapid transport systems

• Townships, housing, built-up infrastructure and construction-development projects

GOVERNMENT POLICIES AND INITIATIVES

• New Tenders to attract project implementators

• Many projects started in various infrastrucure sections

• Constantly simplifying the approval route process by setting severalagencies to expedite FDI approval

• Liberalisation

• Improvising Legal system

• Standardisation for all infrastructure projects

TAX ENVIRONMENT

• Tax Holidays Exemptions

• International Tax Considerations like

– Entry and exit strategy

– Cash and Profits repatriation

– Holding the investmentss

CHALLENGES FOR FOREIGN PLAYER

• Non-availbility of own infrastructure to execute projects

– Skilled Manpower

– Plant and Equipments

– Construction Material

• Risk Sharing with Indian partner

• Cost Cutting and Competitiveness

• Government guidelines for PP developers

• Concerns of Indian Company will tie-ups

BUSINESS STRATEGY

• Concentrate of Core competency

• Mergers and Aquisition

• Tie-up with various Indian Company in all Infrastructure Projects

• Joint Venture with potential partner (like Reliance Infra, etc)

• Competitive cost and cost cutting

• Efficient Utilisation of Indian Resource and Indian Partner

• Target major project in all part of the country

• Implement new technology from Singapore

• Setup manufacturing units and research labs

• Plan Organization Life Cycle

• Good Organization Structure (mix of Indian and Singapore Workforce)

FINANCIAL STRATEGY

• Budget Forecasting

• ROI

• Invest in Top Indian Infrastructure Companies

• Invest in manufacturing companies to reduce the cost and increase the quality

• Setup manufacturing and research units

• Influence other investor in Singapore to invest in your company

• Invest in stable of years

• Invest through FDI (No approval required)

• Invest in all infrastructure sections

• Follow rules and regulation

HUMAN RESOURCE STRATEGY

• Good Organization Structure (mix of Indian and Singapore Workforce)

• Hiring , Training and Development

• Depot Human Resource from Singapore in each firms

• Depot Indian Human Resource to understand the working

• Implement mixture of Indian-Singapore Culture

• Good Compensation

• Transparency in workflow

BUILDING LONG TERM IN INDIA

• Manage Uncertainty and challenges

• Planned investment of funds

• Sustain competition by

– Appropriate pricing

– Funding

– Prioritisation frameworks

• Have holistic approach

• New infrastructure should support social and economic goals

• Invest in fast moving and growing sections

CONCLUSION

• Navigate through views and opinions expressed by various local stakeholders

• No.of contractors from Europe, Australia, China, Malaysia etc have alreadymade their presence felt

• Good Opportunities to develop significant business

• Carefullly slect local business partner

• Long-term and sustainable perspective planning

• Maximize from FDI and Tax benfits

REFERENCE

• http://www.indiacompanysetup.com

• http://www.oifc.in/sectors/infrastructure

• http://business.mapsofindia.com/finance/mergers-acquisitions/strategies.html

• http://business.mapsofindia.com/india-budget/infrastructure/companies-in-india.html

• http://www.constructionweekonline.in/article-7581-top_30_infrastructure_companies/

• http://www.pwc.com

• http://www.idfc.com

• http://www.india-briefing.com/news/fdi-opportunities-indias-infrastructure-development-5508.html/

• http://www.globaljurix.com/foreign-direct-investment-india-fdi.php

• http://www.oifc.in/sectors/infrastructure

• http://www.managementstudyguide.com/strategic-management.htm

THANK YOU