1. FDI ABROAD BY INDIAN COMPANIES-TREND AND PROSPECTS By: AbhijeetSamal(08BSHYD0014) AgrawalLokesh(08BSHYD0037) Alka Sahu(08BSHYD0053) Eeshita Desai(08BSHYD0249) Enika Shah(08BSHYD0250)

2. FDI - any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor An important role FDI Inflows and FDI Outflows FDI – Direct Investment & Portfolio Investment India – Major source to South Asian Countries according to UN Conference on Trade & Development India – BIMSTEC, South Asia Free Trade Zone, FTAs with Sri Lanka & ASEAN Introduction

3. IT Sector Pharmaceuticals Industry Emerging Services and Products Metal Industrial Goods Automotive Components Beverages Cosmetics Industry Energy Sector Mobile Communications Software Industry Financial Services Major Sectors for FDI Outflow

5. Huge Cash Reserves

6. Natural Resources

7. Distribution Networks of Foreign Companies

8. Foreign Technologies

9. Strategic Assets like Brand NamesMajor Factors

11. Good Credit Rating

12. Stronger Balance Sheets

13. Confidence shown by Global Business Communication

14. Competitive Business Environment

15. Larger Fund Supply

16. Favorable Regulatory Environment

17. Higher Margins, profits and revenuesOther Factors

18. Tata Motors & J-LR Tata Steel & Corus Hindalco Industries & Novelis Tata Tea & Energy Brand of US Suzlon Energy & RE Power of Germany Subex Azure & Syndesis of Canada Ranbaxy & Merck ( Deal did not strike ) Some Big Ticket Deals

19. The increasing number of home-grown Indian firms. Indian firms are investing abroad to access foreign markets, production facilities and international brand names. Access to technology and knowledge has been a strategic consideration for Indian firms. Securing natural resources is becoming an important driver for Indian outward FDI. Drivers for FDI Abroad...

21. Large foreign exchange reserve

22. Liberal policies

23. India Corporate Advantage

24. Understanding of global environment:

25. Consolidated domestic presence:

26. Large free cash reservesDrivers for FDI Abroad...

28. Hedge against currency movements of the local currency vis-a-vis other currencies

30. Higher transaction costsPros and Cons...

32. Handling and complying with the special regulatory and tax norms

33. Communication gaps

34. Need to keeping abreast with international and company specific developments

38. Overseas acquisitions by Indian firms Actual Indian FDI outflows: 2008 &early 2009

39. Sectoral Distribution of India’s Outward FDI

41. Policy-led barriers (MRTP, FERA) and slow economic growth main reasons

43. Strong FDI bias towards developing countries

45. Liberalization lifted ceilingsDeterminants of Indian FDI in Developing Countries – Historical perspective

46. Empirical studies on Indian Outward FDI

48. Traditional Manufacturing & service industries like Finance, Telecom and Software services form the major chunk

49. Recent FDI outflows also seen in Pharma, Chemicals and Transport Equipment industry

50. Nature of value-added activities

51. Until 1982, Indian FDI was on local production in host countries

52. Even now there is high volume of manufacturing FDI projects, low volume of trading outflows

53. Market-orientation

54. Indian firms have not used overseas market as export bases

56. Pre-1990s there was sharing of management responsibilities

57. Post-1990s companies preferred full ownership of overseas units

58. Appropriateness of technology

59. Intermediate technologies used in pre-1990 period well suited to capital scarce and labour-intensive conditions

60. Post-1990, trend shifted to in-house R&D and acquisition of foreign entities with specialized products and skills

61. Local knowledge creation

62. Limited contribution in local technology creation

64. Reasons for FDI Decline:2008 onwards

67. Rising per capita income

68. Liberalization of regulations by government

70. Favorable policy changes Hiked the overseas investment limit from 200 per cent of the net worth to 300 per cent of the net worth; Hiked the limit on overseas portfolio investment from 25 per cent of their net worth to 35 per cent of their net worth; Allowed Indian residents to remit up to US$ 1,00,000 per financial year, from US$ 50,000 previously, for any current or capital account transaction or a combination of both. Allowed mutual funds to invest funds to the tune of US$ 4 billion in overseas avenues, from an earlier cap of US$ 3 billion

71. Revival of global and domestic growth Improvements in Corporate Profitability Ease of Financing Cash-rich Indian firms, including SMEs Cheap valuations of Foreign Assets Prospects