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Indian Investments Abroad

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Indian Investment Abroad - Overseas Direct Investment by Indian Companies

August, 2013

Brief Overview

India is considered to be a strategic player on global landscape when it comes to investments and businesses. Standing as the world’s 21st largest outward investor, the country is increasingly encouraging its companies to go out and hunt for new markets and cost-effective sources.

Indian firms invest overseas majorly through mergers and acquisition (M&A) transactions. Indian Government’s supportive policy regimen, coupled with India Inc’s experimental orientation will definitely demonstrate an upward trend in outward foreign direct investment (FDI) in the years to come.

Some of the recent developments and statistics pertaining to the same are discussed hereafter.

Key Statistics

  • Overseas direct investment by Indian companies stood at US$ 3.24 billion in July 2013, registering an increase of 89.5 per cent from US$ 1.71 billion invested in June 2013, according to data released by the Reserve Bank of India (RBI).

    The investments were made across 461 deals; Reliance Communications, Apollo Tyres, Zee Entertainment Enterprises and Tata Communications, being the major investors.
  • A recent report by the US India Business Council (USIBC) has stated that Indian investments in the country has reached US$ 11 billion and has generated over 100, 000 jobs there. The report titled ‘Investing in America, How India Helps Create American Jobs’ highlights how bilateral relation and business with India has helped the US.
  • Similarly, a report by the Europe India Chamber of Commerce (EICC), a body that promotes bilateral trade between the European Union and India, has stated that Indian companies have invested US$ 56 billion across the continent during 2003-2012, of which EUR 29 billion (US$ 38.47 billion) was invested through M&A transactions. The report titled ‘Indian Companies in the European Union: Reigniting Economic Growth’ also mentioned that Indian business houses employ 1.34 lakh professionals in Europe, including 40,000 new jobs generated by 511 green-field investments. Tata Group is the largest employer in Europe, which counts about 80, 000 employees across its 19 companies there. India accounts for a substantial 47 per cent of the green-field investment and 63 per cent of the employment creation in the UK, according to the report.
  • Meanwhile, Corporate India’s M&A activity value touched US$ 1.5 billion in July 2013, according to audit and advisory firm Grant Thornton. The report stated that excluding internal mergers and restructuring deals, the year-to-date M&A deal values have increased by 36 per cent from the value in 2012.

Recent Developments & Investments

  • Indian companies, from energy sector to aviation, are vying for market share in Myanmar. As of now, Indian investments in the country are to the tune of US$ 273.50 million and are anticipated to grow to US$ 2.60 billion in next few years. Myanmar is already host to companies like ONGC Videsh Limited (OVL), Jubilant Oil and Gas, CenturyPly, Tata Motors, Essar Energy, RITES, Escorts, Sonalika Tractors, Zydus Pharmaceuticals Ltd, Sun Pharmaceuticals Ltd, Ranbaxy, Cadila Healthcare Ltd, Shree Balaji Enterprises, Shree Cements, Dr. Reddy's Laboratories Ltd, Cipla, Gati Shipping Ltd, TCI Seaways, Apollo, and AMRI.
  • Kirloskar Brothers Ltd (KBL)’s subsidiary SPP Pumps, has recently inaugurated its most advanced facility at Atlanta, USA. Entailing an investment of US$ 6 million, the new plant is KBL’s seventh manufacturing facility worldwide. With an installed annual capacity of 2, 500 units, the plant is equipped with the latest engineering, testing and training methods and will manufacture and assemble end suction, horizontal split case, multi-stage and vertical turbine pumps.
  • Meanwhile, Indian conglomerate Aditya Birla Group is intending to invest around US$ 1 billion to set up a chemical/fertiliser plant in the US. Currently, half of the group’s US$ 40 billion-turnover is contributed by its foreign markets.

    The latest investment proposal, being considered to take advantage of the falling gas prices in the US, is well aligned with the plans of host of Indian companies that intend to grab opportunities in North America.
  • On the similar note, Apollo Tyres has announced that it would infuse US$ 2.5 billion to acquire the US-based Cooper Tires. Furthermore, Reliance Industries seems to be the largest investor in the American shale gas space with an investment of US$ 5.7 billion as of March 2013.

    Indian wellness and slimming firm VLCC has embarked on its second foreign acquisition by buying a controlling stake in Singapore-based Global Vantage Innovative Group (GVig), which manufacturers and retails beauty and wellness products. The deal, to be guessed worth Rs 100-120 crore (US$ 14.75-17.7 million), is expected to help VLCC in strengthening its position in the South-East Asian region.

    In early 2013, VLCC had acquired Malaysian slimming and personal care firm Wyann International.
  • TVS Motors is planning to establish a two-wheeler assembly line in Uganda and launch two motorcycle models in the African nation. The new products would be specifically designed and developed according to the needs and desires of the clients in Uganda.

    TVS Motor Company is present in Uganda for about a decade now and operates through eight dealers offering sales, service and spare parts support in the country. Yuvaraj International Uganda Ltd has been appointed as its new distributor.

Government Initiatives

Indian Government is making all efforts to integrate Indian economy with rest of the world in the every possible way. India showed a consistent performance even in the toughest of the times and hence is looked upon as a strategic international player and an important source of funds for other economies.

Recently, many of the Indian and Bangladeshi companies have inked agreements for setting up projects in sectors such as limousine services, manufacturing three-wheelers and software development, stated the officials of the Confederation of Indian Industry (CII). Recently, the Indian trade and industry had expressed it to the Government that it continues to see Bangladesh as a “very, very important partner”, and it would like to initiate more of the plans for investment, trade and joint ventures (JV) between the two countries.

In March 2013, the Ministry of External Affairs had revealed that in the last six months or so 38 Indian investments had been registered with the Board of Investments in Bangladesh for about US$ 183 million; major investor being Bharti Airtel, Tata Motors, Sun Pharma, Asian Paints, Marico, Godrej, Venky’s Hatcheries, Parle Products, Forbes and Marshall.

Road Ahead

The Government, RBI, and Indian Corporate entities are constantly reviewing the policies and regulations including Home Country Measures (HCMs) to boost globalisation efforts through outward FDI without having any adverse effects on our domestic economy and its macro-economic stability.

India is expected to be the largest source of emerging market multination enterprises (MNEs) by 2024, according to a recent report by PricewaterhouseCoopers (PwC). By that time, India would be having 20 per cent more MNEs than China, and more than 2, 200 Indian firms are anticipated to invest overseas in the next fifteen years. In a nutshell, Indian MNEs are poised to carve a niche in business services and high-profile manufacturing sectors.

Exchange Rate Used: INR 1 = US$ 0.01475 as on August 29, 2013

Exchange Rate Used: EUR 1 = US$ 1.32649 as on August 29, 2013

References: Media Reports, Press Release, Reserve Bank of India website