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Indian Investments Abroad

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Indian Investment Abroad - Overseas Direct Investment by Indian Companies

May, 2013

Brief Overview

India has witnessed a significant uptrend in outward foreign direct investment (FDI) in recent years. Globalisation being a two-way phenomenon, alignment of Indian economy with the rest of the world can be noticed not only in terms of higher FDI inflows but also in terms of increasing level of FDI outflows.

Emerging market economies (EMEs) are gaining better competence and hence are increasingly participating on global platform. This has facilitated flow of foreign investments from them to the rest of the world. Same goes with Indian companies which are expanding their international presence by investing overseas for acquiring regional and global reach. Indian companies going for foreign investments largely use their locally incorporated overseas subsidiaries or set up holding companies and/or special purpose vehicles (SPVs) in offshore financial centres or other regional financial centres.

SPVs set up in off-shore financial centres, such as, Mauritius, Singapore and the Netherlands, have been majorly used as channels to mobilise funds and invest in third countries, keeping in view the business and legal consideration, taxation advantages and easier access to financial resources in those countries.

Key Statistics

  • Overseas direct investment by Indian corporate stood at US$ 1.88 billion for March 2013, higher from US$ 1.65 billion invested in February 2013, according to a statement released by the Reserve Bank of India (RBI).

    The majority of funds were invested in the form of guarantees. Companies issued guarantees worth US$ 1.46 billion, while they had equity contribution of US$ 217 million and facilitated loans of US$ 201 million. Major companies that invested in foreign countries include Escorts Ltd, Videocon Industries Ltd, ILF&S Group and Glenmark Pharmaceuticals Ltd.
  • Meanwhile, accounting and consulting firm Grant Thornton India has stated that the total merger and acquisitions (M&A) and private equity (PE) deals in the month of April 2013 were valued at US$ 2.92 billion (87 deals) as compared to US$ 2.58 billion (97 deals) in the corresponding month of 2012.

    Moreover, the total value of outbound deals (Indian companies acquiring businesses outside India) in April 2013 was US$ 0.49 billion (11 deals) as compared to US$ 0.38 billion (7 deals) during the corresponding month in 2012.

Recent Developments & Investments

  • Hexaware Technologies, a mid-size information technology (IT) solutions company, has set up an on-shore delivery centre in Texas, US. The centre, with a capacity of 150 engineers, is the company’s third onshore delivery centre in the US (the company already operates two centres in New Jersey). It will support clients in all major services lines offered by the company. Hexaware has started its operations with two anchor customers in the banking and financial services domain.
  • Eureka Forbes, the makers of Aquaguard water purifier and Euroclean vacuum cleaner, is all set to acquire Lux International, a Swiss company having business in the line of home appliances from past 100 years. The Shapoorji Pallonji Group-company has clinched its first overseas acquisition deal wherein it bought a majority stake in a firm which developed the world's first household canister vacuum cleaner.

    Eureka Forbes expects to become the world's largest home products direct sales company through this deal.
  • Jaguar Land Rover has expanded its West Asia test programme by setting-up a new engineering test centre in Dubai, UAE, to conduct extreme hot weather vehicle research, development and testing. The new facility in the Al Barsha area of Dubai is four times the size of the previous test centre and would offer a comprehensive range of tests including durability, calibration and hot weather testing for heat and humidity. It is to enable the company to enhance its testing of future products and technologies.
  • State-owned general insurer New India Assurance is all set to make the best of its international presence. The company that currently operates in 22 countries is planning to enter Qatar, Myanmar and Canada in 2013-14, said G. Srinivasan, Chairman-cum-Managing Director. The company has huge set-up in countries like London, Australia and Japan and has ventures in Kenya, Singapore and other African countries.

    New India Assurance recorded Rs 2, 500 crore (US$ 443.86 million) as its premium income from overseas operations in 2012-13.