Domestic Investment in India

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Last updated: Sep, 2016

Introduction

The Government of India has taken significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world. India is fast becoming home to start-ups focused on high growth areas such as mobility, e-commerce and other vertical specific solutions - creating new markets and driving innovation.

Owing to higher infrastructure spending, increased fiscal devolution to states, and continued reforms in fiscal and monetary policy, the Indian economic outlook has strengthened. The Government of India is striving to move steadily to minimise structural and political bottlenecks, attract higher investment and improve economic performance. According to the World Bank, the Indian economy will likely grow at 7.6 per cent in 2016-17, followed by further acceleration to 7.7 per cent in 2017-18 and 7.8 per cent in 2018-19.

Market Activity

India has emerged as one of the strongest performers in terms of deals related to mergers and acquisitions (M&A). According to data from Thomson-Reuters, total M&A deals involving Indian companies grew by 82 per cent to US$ 27 billion during January to June 2016, which is the highest in the first six months in any year since 2011, led by a four and a half time increase of Indian acquisitions abroad at US$ 4.5 billion. The deal momentum is likely to see an uptrend in the coming months on account of improving economic growth.

Investments/developments

With the improvement in the economic scenario, there have been quite a few investments in various sectors along with M&A in India. Some of them are as follows:

  • Ridlr, a public transport app, has raised US$ 6 million in Series B round of funding led by Times Internet, Matrix Partners and Qualcomm Ventures, which will be used for scaling up its operations, growing user base, and hiring across key roles.
  • ShareChat, a social networking platform for vernacular language users, has raised Rs 9 crore (US$ 1.33 million) in a seed funding round led by SAIF Partners and India Quotient, which will be used for scaling up its technology and expanding its team.
  • Don’t Scratch Your Head (DSYH), a Software-as-a-Service (SaaS)-based logistics reconciliation platform, has raised US$ 250,000 from Venture Catalysts (VCats), a seed investment platform, which will be used for upgrading its technological infrastructure and expanding its customer support team.
  • Piramal Fund Management, the Piramal Group's real estate investment arm, has invested Rs 200 crore (US$ 29.65 million) in Noida's ultra-luxurious residential project, Prateek Edifice, being developed by Prateek Group.
  • TVS Automotive Solutions has invested around Rs 75 crore (US$ 11.12 million) to acquire majority stakes in Delhi-based aftermarket website Jazzmyride.com, analytics firm Hansa Equity and Internet of Things (IoT) firm Redsun Consulting.
  • The Government of Karnataka has approved three investment proposals worth Rs 2,211 crore (US$ 327.76 million), which includes that of PepsiCo and Biocon for setting up their new production facilities in the state, and one expansion project proposal of Manyata Promoters Private Limited.
  • Locus, a logistics management platform, has raised US$ 2.75 million in series A round of funding led by Exfinity Venture Partners, which will be used to expand its team and technology offering.
  • The Chennai Angels, an angel investing group, has invested around US$ 376,000 in parking technology start-up Agile Parking Solutions Pvt Ltd, which creates cloud based mobile parking technology to provide real time parking information for the supply and demand side.
  • Altico Capital India Pvt Ltd, a non-banking financial company, has invested around Rs 575 crore (US$ 85.24 million) across three real estate projects in Mumbai, Pune and Bengaluru, and plans to invest another Rs 600 crore (US$ 88.94 million) in tier-I cities over the next three months.
  • Pink Blue Supply Solutions Pvt. Ltd, a clinical supplies provider, has raised Rs 1.5 crore (US$ 0.22 million) in a seed round of funding from TermSheet.io, a transaction-focused service provider for start-ups and investors, which will be used to ramp up technology, improve customer experience and operational capabilities, put in place smart supply chain management across hospitals and clinics, and hire larger teams.
  • JM Baxi Group, an integrated logistics, services and transportation conglomerate, has initiated talks with Private Equity (PE) funds to raise around US$ 150-200 million, which will be invested in its asset-heavy businesses such as port terminals and container handling facilities.
  • Suzlon Energy Ltd, one of India’s leading wind turbine maker, plans to set up 3,000 megawatt (MW) power generation units of solar, wind and hybrid sources in Telangana, with an investment of Rs 1,200 crore (US$ 177.9 million).
  • The eye-wear division of Titan Co. Limited has invested Rs 40 crore (US$ 5.9 million) to set up a facility at Chikkaballapur, Karnataka to manufacture eyewear frames locally, which will help them reduce time taken to launch new products and gain from savings on import duties.
  • Indospace, a developer of industrial realty and logistics parks, plans to invest US$ 1 billion in India over the next five years, increasing its development pipeline in the country from 20 million square feet to 50 million square feet.
  • The incubation arm of agricultural research institute International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) plans to set up Rs 100 crore (US$ 14.82 million) fund to help small entrepreneurs from the agri-business and nutrition space to raise funds.
  • India’s second largest smartphone seller, Micromax, plans to shift manufacturing of all its phones to India from China by 2018, compared to less than two-third assembled in India currently, as the ecosystem and network of local component suppliers is growing, while Chinese labour costs are increasing.
  • Videocon Industries Ltd plans to set up a mobile handset assembly plant along with manufacturing set top boxes in Punjab for an investment of Rs 500 crore (US$ 74.12 million) over three years.
  • Reliance Industries Limited (RIL) has implemented a ‘soft-launch’ of its 4G telecom service business in December 2015 by rolling out services for employees and their relatives, with a target to execute a commercial launch from March-April 2016.
  • The Union Government has approved setting up of a new Ammonia-Urea Complex of 8.64 Lakh MTA capacity with an estimated investment of Rs 4,500 crore (US$ 667.08 million) under Public Private Partnership (PPP), at Namrup in Assam.
  • Coal India (CIL) plans to invest US$ 20-25 billion in next five years to achieve annual output of 1 billion tonnes by 2019-20.

Government Initiatives

The Government of India has taken several initiatives in various sectors to improve the overall economic condition in the country. Some of these are:

  • The Government of India plans to boost domestic investments in start-ups by restructuring the taxation policy and introducing liberal rules and regulations aimed at helping start-ups list on bourses easily.
  • The state government of Haryana has signed 38 investment agreements with different companies, involving investment commitments of Rs 128,740 crore (US$ 19.08 billion) on the first day of the Haryana Global Investors Summit 2016.
  • Government of Karnataka has approved investment proposals worth Rs 23,383 crore (US$ 3.47 billion) for solar power park, steel plant and a cement plant, ahead of the state’s Global Investor Meet, with a target of total investment of Rs 1 trillion (US$ 14.82 billion) in the next 40 days.
  • During the Invest Karnataka 2016 event for promoting the state among investors and business community, the state government signed 147 projects totalling Rs 1.33 lakh crore (US$ 19.72 billion) across several sectors such as energy, steel, pharmaceuticals, information technology, biotechnology, agriculture, infrastructure and tourism.
  • Prime Minister Mr Narendra Modi has set up a panel called 'The empowered committee for innovative collaborations' which would look into how government projects can be executed using latest technology and processes. The committee will consider projects in areas such as infrastructure, manufacturing and science and technology involving investments of Rs 2,000 crore (US$ 296.5 million) and more.
  • The Department of Information and Technology plans to create a separate online portal for inviting ideas from technology innovators, with the objective to provide them with assistance including finance, and thus help to boost initiatives like Startup India and Digital India.
  • During the Resurgent Rajasthan Summit, 295 proposals worth Rs 3.3 lakh crore (US$ 48.92 billion) received over the past one year were announced on the first day of the summit, which are expected to create 250,000 jobs, as per Rajasthan Chief Minister Ms Vasundhara Raje.
  • The Union Cabinet cleared redevelopment of 400 railway stations, through open invitation from interested parties with their designs and business ideas, including permitting commercial development of real estate by the zonal Railways. 
  • The Cabinet gave its approval for the development of the six-laning of Eastern peripheral expressway in Haryana and Uttar Pradesh. The cost is estimated to be Rs 7,558 crore (US$ 1.12 billion)
  • Union ministry of shipping has planned to raise US$ 15.8 billion in dollar equivalents at the interest rate of three per cent, for developing ships, building ports and improving inland waterways.
  • The Cabinet approved the creation of an intra-state transmission system in Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra and Rajasthan at an estimated cost of Rs 8,549 crore (US$ 1.27 billion). The plan involves setting up of 48 new grid sub-stations of different voltage levels in these seven states.
  • Ministry of environment and forests has granted environment clearance for 35-km coastal road connecting south and north Mumbai. The coastal road project is part of the US$ 9.52 billion transport infrastructure projects being undertaken by the state government and is expected to require an investment of US$ 1.34 billion.
  • The Government of India will provide soft loan of US$ 1 billion to sugar mills to help them clear part of their US$ 3.33 billion dues to farmers. The money shall be directly credited to the farmer’s bank accounts through the “Pradhan Mantri Jan DhanYojna”.
  • In line with Prime Minister Narendra Modi’s Digital India programme, the government launched a digital employment exchange that will enable industrial enterprises to find suitable workers and job-seekers to find employment. The government initiative is aimed at strengthening communication between stakeholders and improving efficiencies in service delivery in the micro, small and medium enterprises (MSME) ministry.

Road Ahead

According to The World Bank, the Indian economy will likely grow at 7.6 per cent in 2016-17, followed by further acceleration to 7.7 per cent in 2017-18 and 7.8 per cent in 2018-19. This is on account of India’s attempt to implement reforms to unlock the country's investment potential to improve the business environment, liberalised FDI policies, quick solution to the corporate disputes, simplified tax structure, and a boost in both public and private expenditure.

Government of India has joined hands with Belarus and has decided to extend a US$ 100 million line of credit for joint ventures with the east European country which has shown interest in the flagship Make in India initiative.

Exchange Rate Used: INR 1 = US$ 0.0149 as on September 02, 2016

References: Press Information Bureau (PIB), Media Reports, World Bank, Department of Industrial Policy & Promotion (DIPP), Grant Thornton, Database of Indian Economy (DBIE)

x IBEF : India Brand Equity Foundation