Team c3

INDIA THE INVESTMENT HUB

Introduction

Foreign Direct Investment(FDI)

Foreign direct investment (FDI) or foreign investment refers to long term participation by other countries into India. It usually involves participation in management, jointventure, transfer of technology and expertise.

India is the second most important FDI destination (after China) for transnational corporations during 2010-2012. FDI for 2009-10 was at $ 25.88 billion. Mauritius, Singapore, US and the UK were among the leading sources of FDI.

Foreign Institutional Investment(FII)

Foreign institutional investor means an entity established or incorporated outside India which proposes to make investment in the financial markets of India. Investors must register with the SEBI to participate in the market. Placing limits on FII ownership in Indian companies.

Positive Indian economy, fast-growing market has made India an attractive destination for FII.

Institutional investors include Hedge funds, Insurance companies, Pension funds and Mutual funds. Hot money- The money coming through FII, this money can be taken out at any time from the market

Role Play

BADAN 11

TOPIC OF THE DAY

INDIA - AN INVESTMENT HUB

SOFTWARE INDUSTRY

INVESTMENT POLICY
Automatic route for foreign equity up to 100 percent

100 percent foreign investment permitted in units set up exclusively for exports.

Tax holiday to R&D up to 10 years with 125% concession

Simplification and liberalization on export and import policy.

OPPORTUNITIES
IT-BPO industry is reached US$ 73.1 billion in 2009-10 witnessing a growth of over 5 per cent. India has the second largest English-speaking workforce in the world. Job Creation: 1million direct and 2-3 million indirect. High quality standards with CMM level 5 companies and 250 fortune 500 clients. Joint software development in super computing applications.

FUTURE PROSPECTS

India is growing @ 9% every year.55% of the growth is contributed by Services sector. As per NASSCOM, the Indian IT exports are anticipated to attain US$ 175 billion by 2020 out of which the domestic sector will account for US$ 50 billion in earnings. NASSCOM said that the domestic IT-BPO is expected to grow by 25-27 per cent during FY12 Huge inflows of foreign direct investments .

GROWTH OF IT

PHARMACEUTICAL SECTOR

STRENGTHS
Low cost of production. Large pool of installed capacities Efficient technologies for large number of Generics. Large pool of skilled technical manpower. Increasing liberalization of government policies.

OPPORTUNITIES
Aging of the world population. Growing incomes. Growing attention for health. New diagnoses and new social diseases. Spreading prophylactic approaches. Saturation point of market is far away New delivery systems.

Current Scenario
Pharma industry turnover is of about US$ 12 billion Pharma export value reached about US$ 4.7 billion About 2.91% of total FDI into the country Drugs and pharmaceuticals sector is at 8th rank in India's top 10 FDI attracting sectors.

Future Scenario
US$ 8 billion market for MNCs selling expensive drugs by 2015 Domestic pharma market is likely to reach US$ 20 billion by 2015 US$ 6.31 billion will be invested in the domestic pharmaceutical sector Dr Reddy's Laboratories has tied up with GlaxoSmithKline

AUTOMOTIVE INDUSTRY

The Automotive Industry in India FACTS

9th largest automobile industry . 2nd largest two and three-wheeler market. 4th largest in Heavy Trucks. Largest tractor manufacturer. Annual production of over 2.6 million units. The monthly sales of passenger cars in India exceed 1 lac units. The automobile industry received FDI worth US$ 436 million in 2010.

SEGMENTATION OF AUTOMOBILE INDUSTRY

15.

96%

3.95%

3.60%

76.49%

Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers

Future prospect of Indian Automotive Sector :

Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011. General Motors announced its plans to export about 50,000 cars manufactured in India by 2011. Maruti Udyog has set up the second car with an investment of Rs 6,500 crore. Hyundai will bring in more than Rs 3,800 crore to India. Tata Motors will be investing Rs 2,000 crore in its small car project. General Motors will be investing Rs 100 crore and Ford about Rs 350 crore. By 2016,industry is expected to grow by 13%, to reach a mark of US$ 120-159 billion.

ENERGY SECTOR

RENEWABLES IN INDIA

Renewables in India: Potential & Prospect

India is the 4th largest country. Wind, Hydro, Biomass and Solar are main renewable energy sources. Ideal investment destination for renewable energy equipment manufacturers and service providers.

 The country has an estimated renewable energy potential of around 85,000 MW from commercially exploitable sources: Wind - 45,000 MW; small hydro - 15,000 MW and biomass/bioenergy - 25,000 MW. India has outlined ambitious capacity expansion and investment plans for the eleventh five year plan period (FY 2007- FY 2012). It has proposed an addition of 15,000 MW of Renewable Energy generation capacities during the period. EREC 2050 69% . New renewables 40%.

FOREIGN INVESTMENT POLICY

Foreign investors - joint venture - for setting up of renewable energy-based power generation projects. Build-own-operate basis. Foreign investors can also set up a liaison office in India. Liberalized foreign investment approval regime to facilitate foreign investment and transfer of technology through joint ventures.

 Proposals for up to 74% foreign equity participation in a joint venture qualify for automatic approval. 100% foreign investment as equity is permissible with the approval of Foreign Investment Promotion Board (FIPB). Various chambers of commerce and industry associations in India can be approached for providing guidance to the investors in finding appropriate partners .

FMCG

 Shares of FMCG are considered defensive rather and fluctuating with the market. Shares are priced high. Shares of HUL are priced at a price Earning multiple of 30, ITC at 29 and Nestle at over 50.

Does it make sense to invest in FMCG stocks?

Historical Perspective:
Merit in investing in defensive stocks. Between Jan 2008 and Mar 2009, sensex fell around 60%, but drop in FMCG was restricted to 30%. Stable earnings and not earnings growth decides the valuation. Free cash generation capacity. Return on equity.

Should you buy?

Beyond a certain level, stocks of even strong companies become unattractive. Today most stocks are above their respective historical averages. Britannia Industries current earning multiple of 75, against the past average of 27, GlaxoSmithKline is at 35 compared to the average of 20, Nestle and HUL at 50 and 30

Compared to past averages of 30 and 35.

PE 26.13 38.24 29.68 50.43 Rather than

Company Price (Mar-10) Colgate870.40 Palmolive Dabur 94.45 ITC 173.10 3774.45 obvious The Nestle culprit is liquidity.

behaving like defensive stocks, FMCGs have moved along with the market

 In recent times, FMCGs have moved up with the market, contrary to conventional wisdom that they are defensive. They may or may not fall. So invest your money selectively.

GROWTH OF GDP

REFERNCES
Modern Banking Technology - Dr. Firdos T. Shroff Scenarios for Risk Management and Global Investment Strategies - Rachel Ziemba, William T. Ziemba The future of foreign investment in Southeast Asia - Nick J. Freeman, Frank L. Bartels Capital Market Dalal Street www.vibrantgujarat.com/do cuments/news/Newslette r-Issue-05.pdf www.moneycontrol.com/.../i ndias-image-asinvestment-hub-to-behit-experts_368555.html indiarealestatemonitor.com /.../what-makes-india-agood-investment-hub