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Indian Investments Abroad

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Indian Investment Abroad - Overseas Direct Investment by Indian Companies

December, 2013

Brief Overview

The net foreign direct investment (FDI) by Indians globally in 2012–13 was a robust US$ 7.13 billion. The Indian economy has seen a discernible upward trend in FDI lately, and more than 2,200 Indian companies are expected to invest overseas in the next 15 years. Among the main drivers behind this development is the growth of Indian multinational corporations (MNCs). These MNCs are targeting new markets for growth and taking risks. They have access to new technologies and strong research and development (R&D) capabilities, apart from being financially stable.

Investments by Indian companies overseas are primarily through mergers and acquisition (M&A) transactions. Since the turn of the millennium, the Tatas, Birlas and the Ambanis – three of the country’s biggest conglomerates – have executed several mergers, joint ventures, acquisitions, and Greenfield investment ventures overseas. With the government endorsing policies that favour foreign investment, and with India Inc’s experimental orientation, the country’s growth in foreign investment abroad could continue for some time to come.

Key Statistics

Indian companies invested US$ 1.29 billion in overseas units and joint ventures in September 2013, according to data released by the Reserve Bank of India (RBI). Alok Industries, Simplex Infrastructures, Tata Petrodyne, Cadila Healthcare, Piramal Enterprises, Mercator and Bharti Airtel were among the major investors during the month.

According to data released by accounting and consulting firm Grant Thornton, the total M&A and private equity (PE) deals in the third quarter (Q3) of 2013 stood at US$ 12.1 billion (233 deals) as compared to US$ 7.63 billion (205 deals) during the corresponding period of 2012. The top M&A sectors were identified as FMCG, food and beverages, oil and gas, cement, pharmaceutical, healthcare and biotechnology, and manufacturing.

Indian investment in the United States (US) recently touched US$ 11 billion and has created more than 100,000 jobs in the country, according to the latest US India Business Council (USIBC) report titled 'Investing in America, How India Helps Create American Jobs'. This demonstrates how the US economy is benefiting from the successful bilateral and business relationship with India.

In 2012, India was the European Union’s (EU’s) eighth largest trading partner. During the period 2003–2012, Indian companies invested some €43 billion (US$ 59.13 billion) across the continent and created three times more jobs than Chinese investments, according to a report by the Europe India Chamber of Commerce (EICC). The biggest chunk of the investment viz. €29 billion (US$ 39.87 billion) went into M&A of 411 companies, while Greenfield investments amounted to €14 billion (US$ 19.24 billion) for a total of 511 projects. The United Kingdom (UK) was the major beneficiary, attracting 47 per cent of India’s Greenfield investments in Europe and 63 per cent of new jobs. Other recipient countries included Germany, Netherlands, France, Belgium and Italy which together accounted for 41 per cent of investments and 25 per cent of jobs created.

Recent Developments & Investments

  • The Indian Angel Network (IAN) is scouting for investment opportunities in the UK and Singapore. The decision to invest in the UK and Singapore-based early-stage ventures has been taken to provide companies in its portfolio with access to global markets, tap into the Indian diaspora as well as to rope in international investors to participate in domestic startups, as per Mr Saurabh Srivastava, Co-founder, IAN.
  • Infosys BPO has opened a new centre in Eindhoven, the Netherlands. This will be a 120-seater delivery centre and will cater to its European and other global customers in the areas of finance and accounting services. With this development centre, Infosys is trying to increase its business from Europe, which contributed 24 per cent to the company’s second quarter revenues.
  • Cadila Pharmaceuticals Ltd has signed a joint licensing agreement with the UK-based antibiotics discovery company Helperby Therapeutics on antibiotic drug resistance R&D. As per the deal, the UK company will supply antibiotic resistance breakers (ARBs), a patented ‘resistance breaker’ compound, to Cadila, which will develop combinations with old antibiotics.
  • Bharti Airtel has entered into a definitive agreement with the Warid Group to fully acquire its Congo operations. The latest acquisition will result in Bharti Airtel leading in the Congo market by number of subscribers – 2.6 million post acquisition.
  • Micromax plans to launch its devices in Russia and Romania. The company, which is all set to become the number one smartphone player in India, is seeking to explore the global market. It is also among the top three phone brands in Bangladesh and Sri Lanka.