India Market
An Overview of Indian Foreign Investment
Foreign Investments
- Continuous liberalization in FDI policy and simplification of procedures are contributing immensely to attracting increased FDI into India. The fact that the Government is now annually conducting a review of the FDI Policy & Procedures has given an added confidence to the foreign investors that their concerns are addressed on a continuous basis.
- Economic Survey 2007-08 says, FDI inflows into India accelerated in 2006-07 due to reforms in policies, better infrastructure and a more vibrant financial sector. On a gross basis, FDI inflows into India after rising to a level of US $ 6.2 billion in 2001-02 has risen to US $ 23.0 billion in 2006-07. The trend continued in the current Financial Year with gross FDI inflows at US $ 11.2 billion in the first six months. FDI inflows continued to be preponderantly of the equity variety, broad- based and spread across a range of economic activities like financial services, manufacturing, banking services, information technology services and construction.
- FDI grew by 179.5 per cent on a net basis during 2006-07 while the growth was 150.2 per cent on gross basis. Even as FDI into India grew substantially, a simultaneous pick up in outward investment moderated the over all net inflows. Outward investment by India shot up from levels less than US $ 2.4 billion in the period 2003-04 to 2004-05 to reach US $ 14.4 billion in 2006-07. Thus, over all net FDI in 2006-07 was at US $ 8.5 billion.
- The trend continued in the current year also with FDI inflows in the period April-September 2007 being moderated by outward investment of US $ 7.3 billion to yield net flows of US $ 3.9 billion. The proportion of payments to receipts under FDI into India was 0.7 per cent and 0.4 per cent in 2005-06 and 2006-07 respectively. This indicates the lasting and stable nature of FDI flows in India.
Indian Investments Abroad
- Country's largest yarn manufacturer Spentex has acquired Schoeller Litvinov k.s. In Czech Republic for $25 million. The acquisition of Schoeller would give the company a footprint in Czech Republic, Germany, France, Belgium, Netherlands and Luxemburg. It will also gain access to a large customer base in over 30 countries and further add an annual volume of about 19,000 tons. The transaction will enhance the topline of Spentex by about 55 million euro and add another 6 million euro per year in cash flows. Schoeller's revenues during the year ending 2006 were 54.5 million euro. This is Spentex's fourth acquisition in the recent past. It acquired SK Birla group's Cimmco Spinners, Indo Rama Textiles and the Uzbekistan-based Tashkent-To'yetpa Tekstil earlier.
- Healthcare chain Apollo Hospital Enterprises Apollo Hospitals has acquired Atlanta based Medical BPO Zavata for $180 million. Zavata has strong operating margins of about 20 percent and has over a thousand process certified staff. Its clients include the New York University's Health Department. Apollo Hospitals says that it is looking for more such acquisitions in the U.S. Analysts say that the buyout gives a lot of upside to the stock as it gives Apollo Hospitals access to the $700 billion U.S. hospital industry.
- Indian IT solutions firm Sierra Atlantic has announced that it had acquired ArrAy, Inc, a Boston-based software engineering services company with global delivery centers in China. The combined entity after the firms assimilate operations will have over 1,500 employees worldwide, a company statement said in Hyderabad.
- Gremach Infrastructure, a company that provides construction equipment on rent, has acquired 75% equity stake in a Mozambique company for $100 million, in a deal that gives it ownership of 11 coalmines in the South African country. Managing director Rishi Raj Agarwal said the move to acquire a controlling stake in Osho Mozambique Coal Mining was in line with its aim to own raw material assets, which would be later, used for coal production. A sharp demand for consumer goods has forced metal companies to increase production and scout for key raw materials such as coal, iron ore and other minerals. Coal is a key raw material and is used to burn iron ore to make steel.
- Reliance Communications' (RCOM) Flag Telecom has announced the acquisition of U.S.-based Yipes for about $300 million in an all cash deal, chairman Anil Ambani said. San Francisco-based Yipes Enterprise Services, Inc. is one of the leading providers of end-to-end Gigabit Ethernet solutions, with 22,000-route km of fibre across 14 metros in the U.S. that covers 40 percent of the total datacom market. Some of its leading global customers include Verizon and NTT."This is the largest acquisition that Reliance Communications has ever made. The acquisition of Yipes drives forward our strategy to offer the most sophisticated, cutting edge data communication products and services, specializing in application and content distribution, spanning developed and emerging markets," Ambani said." This acquisition is going to accelerate Reliance Communications' penetration into the lucrative $100 billion global enterprise market," he said. Ambani also said RCOM would be investing over Rs.1 billion towards rolling out the services by Yipes in Asia, Africa, Middle-East and Europe by mid-2008. "By synergizing Flag and Yipes, Reliance is poised to become the global leader in Ethernet, a $25 billion market worldwide by 2010," Ambani added.
- In its largest buyout and the first in the U.S., Indian IT giant Wipro Technologies announced it was acquiring Infocrossing Inc., a leading provider of IT infrastructure management, enterprise application and business process outsourcing (BPO) services, for $598.4 million in an all-cash deal. "The acquisition of Infocrossing will be through a tender offer for its 32 million fully diluted shares at the rate of $18.70 per share and the transaction will be completed by December," Wipro vice-president and chief financial officer Suresh Senapaty said. "The acquisition is not only our largest deal till date, but also the first one in the U.S. market, which accounts for over 60 percent of our (flagship) IT division's revenue. Senapaty said.
- Reliance Industries Ltd (RIL) said that it has acquired Malaysian polyester producer Hualon Corp Sdn Bhd for an undisclosed sum. Established in 1989, Hualon is an integrated polyester-to-textile maker with half a million tons of polyester capacity, 2,50,000 spindles for spun yarn and facilities for weaving and processing of 5,800 shuttle-less looms. The company also has nylon filament manufacturing capability. This acquisition, when consummated, will be the second international acquisition in the polyester sector by Reliance after the successful takeover of Trevira in Germany in 2004. It will help Reliance consolidate its position further as the global largest polyester manufacturer with 2.5 million tonnes capacity, a 25 per cent increase from the current capacity, and a rise in revenue by around $1 billion.
- Reliance has acquired majority stake and management control of Gulf Africa Petroleum Corporation (GAPCO), which has significant presence in East Africa in the petroleum downstream sector according to an official release issued by Reliance. "The acquisition has been made through a wholly-owned subsidiary, Reliance Industries Middle East, Dmcc (RIME), a company registered in United Arab Emirates. GAPCO, an entity based in East and Central Africa with headquarters in Mauritius, owns and operates large storage terminalling facilities and a retail distribution network in several countries including Tanzania, Uganda, Kenya. It also owns and operates large storage terminals in Dar Es Salaam (Tanzania), Mombassa (Kenya), Kampala (Uganda), and has other well spread depots in East & Central Africa. It also operates more than 250 outlets covering retail and industrial segments," the release added.
- Mumbai-based Firstsource Solutions, a pure-play business process-outsourcing provider, has acquired US-based MedAssist Holding for $330 million (Rs 1,353 crore). The deal is subject to regulatory approval under the US health services research (HSR) statute. It is the second-largest acquisition after Wipro bought out Infocrossing for about $600 million. "This is a strategic investment for us. Firstsource already has a significant presence in the payor (insurance company end) side of the market of the US healthcare back-office sector and this acquisition will give us access to the equally large provider (hospitals end) side," said Ananda Mukherji, managing director and CEO, Firstsource.