Brief Overview

Signalling an increase in global participation and competence, India is

profoundly becoming a source of foreign investment for rest of the
world. As per the ongoing trend, wherein emerging market economies
(EMEs) are under transition, a number of private players, along with
state-owned entities, are increasingly expanding their footprints in
foreign lands through direct investments with a view to achieve regional
and global reach.
Indian economy's integration with the rest of the world has given
domestic corporate sector access to global networks and markets,
transfer of technologies and skills and has also facilitated research and
development (R&D) for value addition. India Inc's foreign investments
have primarily been driven by either resource seeking or market seeking
or technology seeking motives. Talking about the recent times, Indian
companies are increasingly investing overseas for resource acquisitions,
especially to buy energy resources in Australia, Indonesia and Africa.
Key Statistics
Overseas direct investments by India Inc stood at US$ 1.24 billion for
July 2012, according to data released by the Reserve Bank of India
(RBI). The equity investment rose to US$ 436.14 million while the total
loan amount increased to US$ 341.12 million through as many as 459
deals. Major investors like JSW Steel, Bharti Airtel, Tata Steel, Global
Green Company, Religare Capital Markets, Reliance Industries, Spice
Invest and Finance Advisors were involved in the reported outbound
deals.
A jump in outbound deals led to an increase in total merger and
acquisition (M&A) and private equity (PE) combined deal value to US$
2 billion in July 2012.
Recent Developments & Investments
India is being looked upon as a major strategic partner for foreign
countries. International Governments and administrations are welcoming
and promoting Indian investments in a big way.
For instance, Venezuela has urged investments from India in the
petroleum sector while Indonesia (the second largest rubber producer in
the world) has invited Indian rubber industry to invest in that country.
Similarly, Mr Carlos Duarte, Ambassador of Brazil to India, has
encouraged Indian business houses to invest in the Latin American
country across sectors like pharmaceuticals, sugar and ethanol
manufacturing.
African countries also present significant business opportunities to
Indian conglomerates as reflected in India's trade with Africa, which has
increased from US$ 25 billion in 2006-07 to US$ 53.3 billion in 2010-
11. More than 100 Indian companies (involved in food processing,
healthcare, IT, construction, consumer durables, infrastructure, energy,
etc.) are expected to explore investment opportunities in Ghana in the
coming months. Indian poultry sector is also setting up hatcheries
through joint ventures (JVs) in the African continent. They are also
looking for opportunities to supply feed or technology for value
addition.
Other transactions indicating Indian investments abroad have been
enumerated below:
InMobi, the Bengaluru-based mobile advertising network firm, has
acquired UK-based mobile application management and
distribution company Metaflow, for an undisclosed amount. With
the acquisition, InMobi intends to enhance its distribution and
monetisation of content for its business partners. Metaflow will
augment InMobi's developer-oriented efforts and its entire team
will be absorbed by the latter
Indian Oil Corporation (IOC) will infuse Rs 20, 000 crore (US$
3.67 billion) to set-up its first refinery abroad in Sri Lanka. The
plant, with a capacity of 5-9 million tonnes per annum (mtpa)
would be developed through a JV with the Government of Sri
Lankan
Agila Specialities, a subsidiary of the Bengaluru-based
pharmaceutical company Strides Acrolab, has entered into a JV
with Canadian firm Jamp Pharma to launch a range of injectable
generic drugs in Canada. The strategic alliance - Agila-Jamp
Canada Inc - in which Agila holds 70 per cent stake, will introduce
40 products over 2012-14 in Canada
Government Initiatives
Indian entrepreneurs consider JVs and wholly-owned subsidiaries
(WOS) as significant channels for promoting international business. The
Government of India also provisions for financial support to encourage
exports including project exports from India. The overall foreign
exchange reserve status has facilitated relaxed capital controls and
simplified procedures for outbound investments from India; thanks to
steady increment in capital inflows during the second half of 2000s.
The Government keeps upgrading its policy framework in context of
international investments. For instance, it eliminated per annum upper
limit of US$ 100 million for automatic approval in March 2003 and
enabled Indian entities to invest to the extent of 100 per cent of their net
worth. The limit of outward foreign direct investment (FDI) has been
increased to 400 per cent since then.
To give further impetus to overseas investments, the Government has
decided to support smaller players. The Department of Industrial Policy
and Promotion (DIPP) has identified South East Asia, Eastern Europe
and Africa as regions where Indian companies would be encouraged to
acquire assets as well as buy-out companies. The Government had also
approved a policy in 2011 under which it raised investment limit for
'Navratna' firms from Rs 10 billion (US$ 179.4 million) to Rs 30 billion
(US$ 538.21 million) and for 'Maharatna' firms, it has been set at Rs 50
billion (US$ 897.02 million).
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 impacting 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$ 0.01794 as on August 19, 2012




Mumbai: Overseas direct investment by Indian companies fell to USD
2.35 billion in May from USD 2.67 billion in April, the Reserve Bank
said Monday.

The investment in equity declined to USD 341.36 million last month
from USD 596.33 million in April, according to the RBI data.

The total loan amount increased to USD 819.39 million in May from
USD 312.21 million in April.

The amount reported in equity and loan represents the actual outflow.

A total of 467 deals took place during the month by the Indian
companies to carry out the outward foreign direct investment, the data
showed.

Tata Steel, Reliance Industries, Piramal Healthcare, JSW Steel, Monnet
Ispat and Energy, Bharti Airtel, Bajaj Auto, were among the major
overseas investors during the month.

Bharti Airtel invested USD 300 million through its joint-venture in the
Netherlands and Singapore which is into the business of communication,
storage and transportation.

Reliance Industries invested USD 192.42 million through its two
wholly-owned subsidiaries in Australia and the Netherlands engaged in
agriculture, mining and manufacturing.

Piramal Healthcare invested a total of USD 145.34 million through its
wholly-owned subsidiaries in Switzerland and the US involved in
manufacturing business.

Tata Steel made an investment of USD 115.83 million via its wholly-
owned unit in Singapore in the business of finance, insurance and real
estate.

JSW Steel invested USD 56.45 million in Mauritius, the Netherlands
and the US in the manufacturing, whole, retail, trade and restaurant
business.