Issue 24 ♦ November 2006

Capital inflows into India highest in Asia

It can now be confirmed that India has been the most attractive investment destination for foreign investors. Private-external-inflows to India has been the highest in the last three to four years, compared to other emerging countries. The booming capital markets have greatly enhanced foreign investor’s interest in FCCBs , ADRs and GDRs issued by Indian companies. India with inflows of $19.3 billion in 2005 was third after China and South Korea. The average inflows for India through bonds, equities and loans during 2003-2005 has risen by 158.4% as against 40.3% for other emerging markets, states the report, “Funding Corporate India Opportunities in International Financial Markets ” by Economist’s intelligence unit and Bank of America . This is largely driven by Indian companies raising funds in global markets. Increasingly, corporates have been tapping international market largely because of the interest rate differential, hedging benefits, less documentation, faster approvals, greater flexibility and greater visibility, the report said.

Tech hub India draws 25 per cent of global R&D funds

India's innovation basket is all set to swell, as it continues to be a hot R&D destination for companies large and small. The country is drawing 25% of fresh global investments in R&D centres. Many of these centres set up by multinationals are among their largest R&D units outside the US or Europe. In the past few years, over 200 global companies across IT, telecom, biotechnology, chemicals, automobiles, consumer goods and pharmaceuticals have set up their R&D hubs in India. In many cases, such as Oracle, Intel, Adobe, STMicroelectronics (STM), SAP and others, the India R&D centre is their largest facility outside the US or Europe. Others, including IBM, Texas Instruments, Delphi, HP, Microsoft, GE, Philips, Motorola, Google, Cisco, Eli Lilly, Bayer, Siemens and LG Electronics, have been tapping Indian talent for conducting cutting-edge research.

FDI in telecom, IT hits US$ 17.6 billion in 20 months

With companies such as Intel, Microsoft, Cisco, Nokia and Ericsson outlining ambitious expansion plans for India, the FDI commitment in the telecom and IT sectors combined have touched Rs 800000 million  over the last 20 months. As per the data compiled by the Ministry of Communications and IT, against 28 companies that outlined their investment plans, 17 have already infused capital. Companies whose units are already operational include Ericsson, Elcoteq, LG, Nokia, Alcatel, EMC and Xenitis. Six of these companies have committed over $1bn each towards their India operations. This include Cisco’s committment of $1.1 billion, SemIndia’s $3bn proposed investment, Intel’s $1.25bn, Microsoft’s $1.7bn, IBM’s $6bn, and SAP Lab’s $1bn investment. With India becoming an attractive destination for IT and telecom, the investment committed span both manufacturing as well as research and development activities. Cisco’s investment — spread across its next generation network (NGN) Lab at Chennai and e-Governance networking projects — is currently under implementation, while SemIndia’s ambitious proposal entailing a public-private partnership for advanced semiconductor manufacturing with technology from AMD is yet to take off in the absence of the Government’s semiconductor policy which is now being finalised.

32 FDI proposals worth US$ 55.6 million approved

Walt Disney, Volvo, Honda Motors get nod for investment plans. As many as 32 foreign direct investment proposals worth Rs 2500 million recommended by the Foreign Investment Promotion Board have been approved by Finance Ministery. These include investment plans of companies like Volvo, Walt Disney and Honda Motor Corporation.

The largest proposal cleared was Singapore-based Walt Disney Company (South East Asia) Pte Ltd’s Rs 1406.2 million investment proposal in United Home Entertainment. United runs the popular Hungama channel. Volvo Bus Corporation’s joint venture proposal with Bangalore-based Jaico Automobile Engineering to produce 1,000 bus bodies a year for the Indian market, and possibly for export, has also been approved. The initial investment in the JV would be Rs 272 million. The government also gave the green signal to Japan’s Honda Motor Co Ltd to set up a subsidiary for the management of its spare parts operations and business planning.

Indian drug firms top FDA list

With 62 filings, domestic pharma companies have filed the maximum number of drug master filings (DMFs) with the US Food and Drug Administration (US FDA) in the July-September 2006 quarter. The total number of DMFs with the US FDA in the last quarter was 223, with Indian companies accounting for 27.8 per cent. In the last quarter, the Chinese were second in terms of DMFs, with 23 filings.

Realty sector to touch US$ 50 billion, says study

The domestic real estate sector may emerge a US$ 50 billion industry by 2010 and prove one of the most attractive sectors for foreign investments. An industry research by financial services firm India Infoline (IIL) said the real estate sector, which was growing at 33 per cent CAGR (compound annual growth rate), could be a $50 billion industry in the next four years, if the institutional participation supported its growth. The research saw strong economic growth, favourable demographic changes, fiscal benefits, lower interest rates and improvements in institutional framework helping the industry’s growth in the last two-three years. 

TCS, Satyam to tune Qantas systems

Tata Consultancy Services (TCS) and Satyam Computer Services signed seven-year contracts worth US$ 145 million with leading Australian airline Qantas Airways." TCS said the expected value of the contract - to provide a range of IT applications, transformation and maintenance services to Qantas - was around US$ 90 million. Satyam said its agreement covers application development and maintenance services for over 150 applications across a wide portfolio of technologies and was valued at around  $55 million.

Electronics, IT hardware industry to boom in India

High economic growth, large base of young consuming population, rising disposable incomes and explosion in retail format will see the consumer electronics and IT hardware industry in India touch a whopping Rs 70,00,000 million in revenues by 2015 from Rs 9,57,000 million in 2005. According to a study by Consumer Electronics and TV Manufacturers Association (CETMA), the contribution of electronics hardware to GDP is expected to rise from 1.8 per cent in 2005 to 12 per cent by the year 2015. CETMA said various industry segments such as television, refrigerators, washing machines and air conditioners were witnessing healthy growth rates. Also, new product categories like digital still cameras, digital audio players and camcorders were experiencing a spurt in demand.

Cairn to invest US$ 90 million in Ravva oil fields

Oil explorer Cairn Energy (CEL) will invest $90 million along with its joint venture partners over the next nine months toward drilling activity at Ravva, the offshore oil and gas field in the K-G Basin. "Ravva is truly a ravva (diamond in the local Telgu dialect) for us. We will invest another $90 million here to explore further opportunities,Director (Exploration), CEL, said. Cairn Energy, ONGC, Videocon and Ravva Oil, a wholly owned subsidiary of Marubeni Corporation, have 22.5 per cent, 40 per cent, 25 per cent and 12.5 per cent stakes in the Ravva field, respectively. These joint venture partners have so far invested $700 million in the field since 1994.

Merieux takes 60 per cent in Shantha Biotechnics

French biotech major Mérieux Alliance has acquired a majority stake in the Hyderabad-based vaccine company Shantha Biotechnics for an undisclosed amount. The company has acquired a 50 per cent stake belonging to a group of Omani investors and another 10 per cent from a team of non-resident Indian investors, taking its total stake in Shantha Biotechnics to 60 per cent. The deal is a strategic investment by the French company to strengthen its presence and manufacturing activities in Asia.

India takes on the world: Time magazine

A string of acquisitions abroad by Indian companies, which have spent over $10 billion to buy foreign firms this year, is not a one-off thing and may continue for years to come complemented by a healthy economic growth at home. "One reason Indian companies are suddenly growing abroad is that they can," Time magazine said in an article 'India Takes on The World' in its latest issue. The Time article, which warns big companies to beware of "that Elephant in the room, (it) may be an Indian competitor looking to buy you out," comes ahead of the World Economic Forum's annual India Economic Summit -- an event that allows companies to network and strike multi-million dollar deals in closed-door meetings. "In the first 10 months of 2006, Indian companies cut more than US$ 10 billion worth of cross-border deals, up from about US $ 1 billion in all of 2000," the magazine said.

Tata in Forbes top 20 most reputed firms list

Eight Indian business houses have made to the Forbes list of world’s most reputed companies, with the country’s largest corporate conglomerate Tata group sharing space with the top 20 global firms. Tatas, the largest Indian group in terms of revenues and market capitalisation, has been ranked at the 20th position among the most reputed company list of Forbes. Maruti Suzuki, Hero Honda Motors, HLL, ITC, SBI, Infosys and M&M have also managed to find place in the top 200 list.

India among largest foreign investors in Russia

India, with an investment of $130 billion, is among the largest investors in Russia, a government agency report said. "India, Britain, The Netherlands, Cyprus, France, Germany, Luxemburg, Switzerland and the United States were the largest investors in Russia, accounting for 82.3 per cent of country's total accrued foreign investment and 84 per cent of total Foreign Direct Investments (FDI) during the reporting period," the Federal Statistics Service said. India has been identified among the top investors in Russia's oil and gas sector in Jan-September 2006 with a total investment of USD 1.543 billion including 21.7 per cent sectoral share of USD 1,425 billion in FDI, report said.

Bosch to invest US$ 201 million in India

Bosch, the German auto components giant, will invest Rs 9000 million in its Indian subsidiaries over two years. Bulk of the investment will be in Motor Industries Co Ltd (Mico) - the Bosch flagship in India. Talking to reporters, Mico’s Managing Director  said: “Bosch is keen to increase its presence in emerging market like India. As part of its India growth plan, the company decided to invest Rs 18000 million between 2005-08. We have already invested Rs 9000 million. The balance Rs 9000 million will be invested over two years.” Mico Ltd, in which Bosch holds 60.55%, has received Rs 5500 million infusion to develop diesel technology and common-rail system at its four facilities - Bangalore, Nasik, Naganathapura and Jaipur. It will receive another Rs 8500 million in the next two years to ramp up capacities at Jaipur and Nasik and for setting up new facilities.

HSBC pumps US$ 200 million in India operations

The Hongkong and Shanghai Banking Corporation (HSBC) has infused fresh capital to the tune of US$ 200 million into its India operations to support business expansion in high growth economy. With this additional investment, the British bank’s capital base India has grown from Rs 40,013 million at the end of March 2006 to Rs 49,095 million now. The fresh capital infusion was done on October 31, 2006.

Cairn to invest US$ 2.02 billion in Rajasthan oil block

Cairn India, the Indian subsidiary of Scottish firm Cairn Energy, plans to invest over Rs 91,400 million in its prolific Rajasthan block, home to the largest onshore oil discovery in more than two decades. Cairn plans to invest Rs 69,000 million in the giant Mangala field alone over the life of the field till 2014, according to the draft red herring prospectus (DRHP) filed by the company for an initial public offering (IPO) in December. Mangala is the largest of the 18 discoveries the company has made in the Rajasthan block, where the company estimates an inplace reserve of 3.6 billion barrels. "We expect that further capital expenditure will be required to maximize the full potential of the Mangala field to 2041 and total gross capital expenditure over the field's life is estimated to be approximately $1.5 billion, of which $51 million was incurred before 1 July, 2006," the DRHP said.

FDI inflow in real estate builds up to US$ 3 billion in H1

The real estate sector has attracted FDI worth US $ 3 billion in the first half of 2006. This is the highest ever FDI inflow into the Indian real estate sector. Total FDI inflow into the country in financial year 2006 was US $7.5 billion. The Dubai-based Emaar Group is perhaps the biggest FDI contributor in the country, with the bulk of its US $ 850 million investment coming in the first half of this calendar year. Other big ticket FDI inflows included Morgan Stanley Real Estate, investing Rs 3000 million in Alpha G Corp, US-based Siachen Capital buying stake in Bangalore-based Nitesh Estates for $100 million, and UK’s Liberty International which picked up 25% in Prozone Enterprises for Rs 2025 million to develop large format shopping centres.

Taj to buy Ritz-Carlton

Taj Hotels Resorts and Palaces said it had agreed to buy The Ritz-Carlton Boston hotel, the longest continuously operated Ritz-Carlton hotel in the United States, for US$ 170 million. The 79-year-old luxury hotel, a fixture in Boston's elegant Back Bay section, overlooks one of the oldest parks in the country. It is being sold by Millennium Partners, a New York- based real estate developer. The 273-room hotel will be renamed Taj Boston, Indian Hotels Chief Executive Raymond Bickson said in a statement. Taj Hotels Resorts is a unit of Indian Hotels Co. Ltd., India's biggest hotel operator.

Indian pharma companies aim for the biggest global buy

This could well be the biggest Indian acquisition in the global pharma space. Two Indian pharma giants and a private equity (PE) player are eyeing Minnesota-based 3M’s pharmaceutical business, which is up for sale. According to private equity sources, Ranbaxy, Wockhardt and Warburg Pincus have evinced interest in the US branded generic player. 3M mandated Goldman Sachs this April to find buyers for the division — reportedly valued upwards of US$ 1 billion. The acquisition will help the Indian pharma industry to enter the US and bag 3M’s branded drugs.

Baramati recipe can go global

When US$ 32.82-billion chipmaker Intel Corporation Chairman made his first stopover at Maratha strongman Sharad Pawar's hometown of Baramati on his eighth visit to the country, he got a recipe that has global application. Spending an entire day as part of the company’s 'World Ahead Programme' - bringing technology to rural areas by supporting the government - in Baramati, Barrett was overwhelmed by the technological advancement made in this little town. “I came to Baramati with an intention to understand and replicate the IT applications used here at other rural locales in India. But I am now convinced that the Baramati recipe can find global application. I will be taking this case study to the United Nations to be replicated worldover, who also chairs the UN Global Alliance for Information and Communication Technologies (ICT) and Development, said.

First Wimax City

Intel Chairman’s visit to Baramati also marked the launch of WiMax connectivity, making it the first city in the country to have become net-enabled. Speaking about the move, Union Minister for Agriculture and Food Supplies said,”The WiMax technology, in collaboration with Intel, has been launched in the city and will serve a bigger intention — that of bridging the digital divide. We hope that the Baramati example can teach other rural areas the role of technology in transforming a city.”

German Companies in India: Lahmeyer International

Lahmeyer International GmbH, Germany founded in 1966 is an independent consulting company offering consultancy services for projects worldwide in the fields of Energy,Water,Transportation, Infrastructure Development, Environment and Technology.The Lahmeyer Group comprises eight associated companies and six branch offices and subsidiaries. Altogether, Lahmeyer International has a staff of around 900 and is currently executing projects in more than one hundred countries. Lahmeyer International (India) Pvt. Ltd., a subsidiary of Lahmeyer International, was established in 1993 as an independent consulting and engineering company offering a complete spectrum of technical, commercial and contractual advisory services in large Infrastructure projects, mainly in the Energy,Water and Transportation Sectors.

BG to invest US$ 1 billion

Global gas major British Gas will invest around US$ 1 billion in its Indian assets over the next five years. This includes a US$ 275 million investment in the Panna Mukta Tapti oil field in Gujarat. The oil field is owned by a consortium which includes Reliance Industries, ONGC and BG. British Gas owns 30 per cent stake in the consortium. The consortium is planning to increase recoveries from the field, BG Chairman said. The three companies together are expected to invest around $750 million in the field to increase recoveries from the current 10.5 million standard cubic metre per day (mmscmd) to 17 mmscmd by mid-2007. The Chairman also indicated that a similar amount may be invested in the company’s other asset, an exploration block in the Krishna-Godavari basin in which it is a partner with ONGC.

Timken plans US$ 25 million plant in Chennai

US-based The Timken Company plans to build a new bearing manufacturing facility in the country. The plant, to be located in Chennai’s Mahindra World City special economic zone, will produce a range of anti-friction bearings for the global markets. The plant is estimated to cost US$ 25 million. The construction is likely to begin by the end of this year, with the plant expected to go onstream by the fourth quarter of the next financial year. Timken, which currently employs approximately 1,000 people in the country, anticipates adding approximately 300 positions to operate the Chennai plant.

GE to invest US$ 600 million, eyes US$ 8 billion from India

GE India, part of the global GE conglomerate, plans to invest $600 million in the Indian market in the next three years even as it targets a topline of $8 billion from Indian operations by 2010. The company also expects the assets of its Indian operations to touch the same figure of $8 billion by 2010. Earlier in May 2006, GE’s global Chairman and CEO Jeff Immelt had announced a $250 million investment in infrastructure and healthcare projects in India and said that GE intends to dramatically expand its industrial and financial presence in the country. The world's largest corporate has identified India as its fastest growing market from emerging markets even as it anticipates global revenues from this segment to double to over $50 billion by that period. "Our target is $8 billion in revenues and $8 billion in assets by 2010. We will be investing about $600 million in the Indian market over the the next three-four years. This could also go up depending on the number of power projects that we can get our hands on," said GE India President and Chief Executive.

India, China target US$ 40 billion trade by 2010

Rows and rows of cheap, shiny plastic toys; colourfully-wrapped firecrackers, electronic gizmos and silk neatly stacked on shop shelves are the most visible signs of China in India. But prepare yourselves for the next wave of ‘Made in China’ products to appear on market shelves as the dragon gets ready to come to town. And also imagine this, the Chinese eating Indian basmati rice and buying made in India clothes. The world’s two fastest economies set the bar high for bilateral trade and agreed to increase the volume of bilateral trade to $40 billion by 2010. Talks between the India Prime Minister and the Chinese President largely centred around increasing trade and co-operation, leaving the contentious for another day. In a joint declaration released at the end of the talks, the two countries promised to diversify the trade basket, remove existing impediments and optimally utilise the present and potential complementaries in their economies.

Indian Mutual Funds give highest returns

In the medium to long term, Indian mutual funds have rewarded their investors better than any other fund in world. Whether we look at a time period of 10 years, five years or three years, a majority of the ten best performing equity-oriented funds in the world are from India. Over a 10-year period, Indian funds have grabbed eight of the top 10 ranks. Over the last five years, they account for seven of the top 10 and over a 3-year period, six of the 10 best performing mutual funds are from India. Russian funds are the only non-Indian funds in the top ten over a 10-year or 5-year period, according to a report by Lipper, a leading market research agency. Over 3-year period Russian funds give up the positions to funds from Korea and Norway.

India's now a major exporter of financial services

After software services, India is now also emerging as a major exporter of financial services. In financial year 2006, the earnings in forex were $1.7 billion from providing financial services to the rest of the world. From being a net importer of financial services, India, for the first time since 2000, has emerged as a net exporter of financial services. Net inflows on account of financial services aggregated $1,087m in 2005-06, according to the latest balance of payments figures. Contrast this with the net outflow of $1,626 million in 2000-01.