INDIA’S OUTBOUND FDI…

DEFINITION

Foreign direct investment (FDI) or foreign investment refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.

TRENDS FDI outflows from India are quite different from

East Asian economies both structurally and inter temporally.

FDI outflows from India have accelerated only in the last decade post liberalization while those from East Asia have been taking place for more than 20 years.

Government policies in India as well as strong domestic growth are some of the key factors which have given confidence to Indian firms to pursue acquisitions abroad through the FDI route.

A majority of India's outbound FDI flows has been as a consequence of a quest for raw materials since India is a raw material scarce country

A lot of India's FDI outflows in recent times have been in acquisitions in the IT and IT services sectors.

FAST FACTS In 2007-08 overseas investment from India was around

$15 billion - surpassing foreign direct investment (FDI) inflows in the country, says a study. 

The bulk of outward FDI flow was driven mainly by India's booming manufacturing sector

Indian companies' preferred investment destinations are the European countries and the US, as also Africa taking advantage of its cost competitiveness. 

Sectors such as pharma and automobiles gave a major thrust to the FDI outflow.

The number of outbound M&A deals has increased sharply over the past six years from about 37 in 2001 to more than 170 in 2006.

According to Assocham, the Indian conglomerates that are upbeat on inorganic growth are the Tata group, Bharat Forge, Ranbaxy, ONGC, Infosys and Wipro.

Graph showing the FDI outflow from India over the last 5 years

FDI outflows are expected to double over the next 5 years with a CAGR of 16.7%

PREFFERED MODE OF ENTRY

A total of 287 instances of foreign investment out of India were classified into the following categories:

1. Minority stake2. Alliance3. Joint venture4. Expansion5. Acquisition6. Greenfield

India’s outward direct investment based on mode of entry

INDIA’S M&A ABROAD

REASONS FOR INVESTMENT

1. Market seeking

2. Technology/ brand seeking

3. Resource seeking

Foreign investment based on intent of investment

TARGET COUNTRIES FOR INVESTMENT

The target countries were identified into 6 major geographies as follows:

1. North America2. South America3. Asia4. Europe5. Middle East6. Africa

Foreign investment based on geography

COUNTRY WISE OUTBOUND AQUISITIONS

FDI INFLOWS V/S FDI OUTFLOWS

ADVANTAGES

1. Image creation2. Portfolio diversification3. Foreign exchange earnings4. Global exposure

DISADVANTAGE

Political risk Capital outflow Shift of multiplier effect

CONCLUSION…

Thank you… Rohit Goyal Mayank Singhal Vineet Mohta Prachi Prachi Ruchita Ankush