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					Investing in India
India as an investment destination

29 February 2012
Why India
India- Compared to the Globe
India is the ninth largest economy in the
world and the fourth largest in terms of PPP
 India is the ninth largest economy in the world                                       India is the fourth largest economy in the world by GDP (PPP exchange rates)

 Rank                            Country                    Economy size 2010          Rank                                         Country                                  GDP (PPP*) 2010
                                                            (US$ trillion)                                                                                                   (US$ trillion)

              1                US                                   14.53                               1                      US                                                             14.5
              2                China                                5.88                                2                      China                                                          10.1
              3                Japan                                5.46                                3                      Japan                                                          4.3
              4                Germany                              3.29                                4                      India                                                          4.1
              5                France                               2.56                                5                      Germany                                                        2.9
              6                UK                                   2.25                                6                      Russia                                                         2.2
              7                Brazil                               2.09                                7                      UK                                                             2.2
              8                Italy                                2.06                                8                      Brazil                                                         2.2
              9                India                                1.63                                9                      France                                                         2.1
             10                Canada                               1.58                               10                      Italy                                                          1.8
 Source: IMF                                                                         *PPP - Purchasing power parity
                         External Debt to GDP ratio                                                  Investment as a percentage of GDP
 Portugal                                                    239%
  Austria                                                   234%
  Finland                                                 217%
  Greece                                              191%                  48.2% 48.7%
    Spain                                            182%
 Germany                                           170%                               36.8%
                                                                                           37.6%
       US                           100%                                                                                                  19.9%
                                                                                                   23.0%                    21.4%                               21.2%
   Japan               50%                                                                             21.8%       22.7% 20.2%       20.2%           19.8%   19.2%         19.1%
                                                                                                                                                                        17.3%         15.8%    15.0%
                                                                                                                20.3%                             19.3%
  Russia             37%                                                                                                                                                           15.8%            14.1%

     India         21%
    Brazil         19%
    China         9%                                                         China        India    Spain       Russia    Japan        Italy       Brazil     France Germany          US          UK

             0%   30%   60%   90% 120% 150% 180% 210% 240% 270% 300% 330%                                                      2010           2011E
 Source: CIA World Factbook (accessed 3 January 2012)                        Source: IMF



Page 4                                                          India as an Investment destination
World Economy: India stands tall on the
savings front
            India compared with the developed world                                           India’s position among BRIC nations
                                                                                                                                                                  India has one
                                                  Gross national savings (% of GDP) – 2010                                                                        of the leading
                                                                                                                                                                  savings rate
                                                                                          53.4
    34.2                                                                                                                                                          across the
                                                                                                                                                                  world. It
                                                                                                                                                                  outperforms
                 23.8   23.0                                                                              34.2                                                    various
                                                                                                                                                                  developed
                                    18.6     18.4
                                                      16.9                                                                      25.1                              world nations
                                                               12.5                                                                                               with a savings
                                                                        11.8                                                                    17.0
                                                                                                                                                                  rate (as a
                                                                                                                                                                  percentage of
                                                                                                                                                                  GDP) at 34.2%

    India        Japan Germany France        Spain    Italy    US       UK               China            India                 Russia          Brazil

                                                              Unemployment rate – 2010
  Spain                                                               20.1%                                                                                       India’s
                                                                                India                                                               10.0%         unemployment
   India                                   10.0%
                                                                                                                                                                  rate is higher
 France                                    9.8%                                                                                                                   when
                                                                               Russia                                                    7.5%                     compared to
     US                                    9.6%
                                                                                                                                                                  BRIC nations
    Italy                             8.4%                                                                                                                        as well as the
                                                                                Brazil                                             6.7%                           developed
     UK                             7.9%
                                                                                                                                                                  economies
Germany                         7.1%                                                                                                                              such as the US
                                                                               China                                4.1%
  Japan                      5.1%                                                                                                                                 and France.

            0%          5%            10%            15%         20%           25%       0%        2%          4%          6%            8%     10%         12%

 Source: IMF                                                                                     Source: IMF

Page 5                                                                India as an Investment destination
World Economy Outlook: India continues its
stable positioning
  20.00
                                                      Real GDP growth (% change)

  15.00


  10.00


   5.00


   0.00


  -5.00


 -10.00              US          Eurozone     Japan         China      India       Russia    Brazil      UK
              2007        2008        2009     2010          2011      2012        2013     2014        2015       2016

     Source: IMF


    ► The world output is expected to be sluggish due to slower recovery in advanced economies and large increase in
      fiscal and financial uncertainty across the countries. According to the IMF, the world economy is expected to grow at a
      rate of 4% in 2012.
    ►     Advanced economies are projected to expand at a slow pace in 2012 with the US expected to grow at 1.8% and
          Japan’s GDP expected to grow by 2.3% after the mild recovery from the aftermath of March 2011 earthquake. Euro-
          zone is expected to grow at 1.4% in 2012 owing to the current debt crisis.
    ►     Growth for the emerging market economies is expected to remain robust. Among the BRIC economies India and
          China have maintained a stable position, driven by buoyant exports and strong domestic demand. IMF projects China
          and India to grow at 9.0 % and 7.5% respectively in 2012.



Page 6                                           India as an Investment destination
Indian economic overview
Growth outlook

                    Growth rate (%)                             FY10           FY11        FY12E

  GDP (at factor cost)                                           8.0            8.5         7.1
    - Agriculture and allied activities                          0.4            6.6         3.1
    - Industry                                                   8.0            7.9         5.2
    - Services                                                   10.1           9.4         9.0
  Private final consumption expenditure                          7.3            8.6         7.0

  Government final consumption expenditure                       16.4           4.8         4.0

  Gross fixed capital formation                                  7.3            8.6         8.6
  Wholesale price index                                          3.6            9.9         8.4
  Index of industrial production                                 5.3            8.2         5.6
  Exports                                                       (2.6)          41.3        19.5
  Imports                                                       (3.9)          22.5        27.4
  Corporate PAT                                                  28.4           9.1        (6.2)


   Source: CMIE Monthly Review of Indian Economy (2011 – December)
   *CMIE projections

   India’s economic growth slipped to 6.9% in the second quarter of FY12 mainly due to poor
   manufacturing performance and declining output of the mining industry.



Page 8                                                India as an Investment destination
      Robust forex reserves
     Net FII investments                                                                                                                              BSE Sensex (as at month-end)
                                                                                           15,548
               15000                                                                                                                             20,000
               13000
                                                                                                  10,963
US$ million




               11000                                                                                                                             19,000     19445.22 19,135.96       18,845.87
                                                                               9,260                                                                            18,503.28
                                                              7,934                                                                                                                                 18,078.00                   18,078.00
                9000                                                                                                                                                18,197.20                                    17,705.01
                                                                   6,631                                                                         18,000 17,823.40
                                                                                                                                                        18,327.76
                                                                                                                                                                                      17,705.01     18,197.20
                                                         6,427
                7000                                                                                                                                                                        17,194.00
                                                                                                                                                                                                                                 17,194.00
                5000                                                                3,702                                       4,243            17,000                      16,676.75
                                                                                                                                                                                                  16,676.75
                3000                                                                                             1,751
                                                                                                                                                 16,000                               16,123.46
                                                                                                                                                                                 16,453.76                    16,453.76
                                                                                                                         291                                                                                       16,123.46
                1000                                                                                                                                                                                                           15,454.92
               -1000                                                                                                                             15,000                                    15,454.92
                                   -676                                                                   -520
               -3000 -1,985
                          -2,014               -2,484
                                          -2,716
                                                                                                                                                 14,000


Source: Securities and Exchange Board of India
                                                                                                                                          Source: BSE website
Note: FII inflows have fallen in 2011 under the impact of inflation, corruption scandals                                                                                                                               Significant
and expected lacklustre performance of Indian equities                                                                                                                                                              depreciation of
               Foreign exchange reserves in India                                                                                       Forex markets                                                                Indian Rupee
                                                                                               319 319
               320                                                             314 312   316                   316 314
                                                                                                         312                               130                            USD-INR
                                                                         305
                                             298         297   299 302                                                   297
                                                                                                                                           125
                                                                                                                                                                          JPY-INR
               300                     293         292                                                                         294         120
                                                                                                                                           115                            EUR-INR
 US$ billion




                             284 283
                                                                                                                                           110
               280 274 276                                                                                                                 105
                                                                                                                                           100
                                                                                                                                            95
               260                                                                                                                          90
                                                                                                                                            85
                                                                                                                                                                                                                      Indian Rupee
                                                                                                                                            80
               240                                                                                                                                                                                                    joined the elite
                                                                                                                                                 Mar-09




                                                                                                                                                 Mar-10




                                                                                                                                                 Mar-11
                                                                                                                                                 Sep-09
                                                                                                                                                 Oct-09
                                                                                                                                                 Dec-09




                                                                                                                                                 Sep-10
                                                                                                                                                 Oct-10
                                                                                                                                                 Dec-10




                                                                                                                                                 Sep-11
                                                                                                                                                 Oct-11
                                                                                                                                                 Dec-11
                                                                                                                                                 Jun-09




                                                                                                                                                 Feb-10


                                                                                                                                                 Jun-10




                                                                                                                                                 Feb-11


                                                                                                                                                 Jun-11
                                                                                                                                                 Apr-09

                                                                                                                                                  Jul-09


                                                                                                                                                 Nov-09
                                                                                                                                                 Jan-10

                                                                                                                                                 Apr-10

                                                                                                                                                  Jul-10


                                                                                                                                                 Nov-10
                                                                                                                                                 Jan-11

                                                                                                                                                 Apr-11

                                                                                                                                                  Jul-11


                                                                                                                                                 Nov-11
                                                                                                                                                 Aug-09




                                                                                                                                                 Aug-10




                                                                                                                                                 Aug-11
                                                                                                                                                 May-09




                                                                                                                                                 May-10




                                                                                                                                                 May-11
                                                                                                                                                                                                                      group of unique
                                                                                                                                                                                                                      currencies
                                                                                                                                        Currencies rebased to 100 at end of March 2009
               Source: RBI                                                                                                              Source: Oanda website
                                                                                                                                                                                                                      in 2010


      Page 9                                                                                         India as an Investment destination
 FDI inflows – India the third most attractive
 FDI destination in the world
                                                                                                FDI in India (US$ billion)
                                                                                                    40                                              37.8        37.8
                                                                                                                                        34.8
► Top global destination for FDI: According to UNCTAD’s ‘World                                      35
  Investment Prospects Survey ‘2011-2013’, India is the third most                                                                                                          30.4
                                                                                                    30                                                                                   27.9
  attractive destination for FDI (after China and US) in the world.




                                                                             US$ billion
                                                                                                    25                      22.8
► Decline in FDI inflow during FY11: FDI in India stagnated
                                                                                                    20
  during FY10 witnessing a y-o-y decrease of 0.20%. It witnessed
  a steeper 19.6% decline during FY11.                                                              15
                                                                                                                 9.0
                                                                                                    10
      ► Key causes: The decline in FDI can be attributed to delay in
        government approvals for projects, land acquisition issues and                                   5
        macroeconomic factors such as interest rates and inflation.                                      0
                                                                                                                 FY06       FY07        FY08        FY09        FY10       FY11P*      FY12P
► Renewed momentum in FDI in FY12: During FY12 (Apr-Oct),                                                                                                                             (Apr-Oct)
                                                                                            Source: RBI Bulletin
  the FDI inflow into India has witnessed a remarkable comeback                             FDI includes credit portion of direct investment in equity, reinvested earnings and inter company
  growing y-o-y by 45.3%. The government is likely to ease FDI                              debt transactions
                                                                                            *Provisional
  norms in single brand retail (plans to increase FDI cap to 100%
  from 51%), thereby promoting retail FDI.                                                       Number of proposed investments and their value
                                                                                                                                                                                4,336
                                                                                                         450                       6,338        6,371          4,085                                7,000
                                                                                                         400         5,218                                                                          6,000
►   Investment momentum: During the period 2003-2010, the value                                          350




                                                                                                                                                                                                            Number of deals
                                                                                                                                                                        3,475              3,116    5,000

                                                                                           US$ billion
    of investment proposals into India increased at a CAGR of                                            300 3,991                                      3,818 342.4
    approximately 47.4%.                                                                                 250                                                                                        4,000
►   Sustained growth during 2011: During 2011 (till September),                                          200                                                                              258.0     3,000
                                                                                                         150                                                                     390.2
    India has received 3,116 investment proposals amounting to                                                                                       187.5                                          2,000
                                                                                                         100                                                           233.8
    US$288.7 billion.                                                                                     50                                                                                        1,000
                                                                                                                       58.1          80.2 133.3
►   Procedural reforms: The Government has allowed Foreign                                                 0    25.8                                                                                0
    Investment Promotion Board (FIPB) to clear FDI proposals up to a                                              2003     2004     2005     2006     2007     2008     2009     2010     2011
                                                                                                                                                                                           Till
    limit of INR12 billion. Earlier investments above INR6 billion were                                                                                                                    Sep
    put before Cabinet Committee of Economic Affairs (CCEA) for                                                            Proposed investment                     Number of proposals
    approval.                                                                                             Source: Department of Industrial Policy & Promotion, Government of India
                                                                                                         *Includes Industrial Entrepreneur Memoranda, Letters of Intent and Direct Industrial Licenses
 *Exchange rate =INR 52 /US$ (for 2011 proposed investment)
 Page 10                                                      India as an Investment destination
 FDI Equity – leading sectors and countries of
 origin
                          Break up of FDI by sectors                                                    ►    Services sector continues to be the favorite investment
                                                                                                             destination for foreign investors. The sector attracted US$3.3
            FY11                                        FY10                                                 billion FDI in FY11 (US$4.2 billion during FY10).
             5.8%                                                                                       ►    During FY11, services sector share in FDI stood at 17.5%
    6.4%                                            11.0%                         Services Sector*
                                            5.6%                                                             followed by telecommunications (9%) and automobile
                                                                                  Telecommunications         industries (7%)
  6.9%                                     4.7%
                                                                                                        ►    In FY11, metallurgical industries witnessed the highest growth
                                                                                  Automobile Industry        (171%) in attracting FDI over FY10 followed by petroleum and
  8.6%                         54.8%       9.9%
                                                                        52.0%                                natural gas sector (111%) and chemicals (10%).
                                                                                  Power
                                                                                                        ►    In the period Apr-Oct 2011, India received FDI equity inflows
                                                                                                             of US$20.3 billion.
                                                                                  Housing & Real
  17.5%                                     16.8%                                 Estate                ►    Between Apr-Oct 2011, services sector had the largest share
                                                                                  Others**                   in inbound FDI with a share of 16.9%. It is followed by drugs &
Source: Department of Industrial Policy & Promotion, Government of India                                     pharmaceuticals (15.2%) and telecommunications sector
                                                                                                             (9.7%).
                    Break up of FDI by countries of origin

            FY11                                        FY10                                            ►    Mauritius has been the largest source of FDI inflows in India
                                                                                                             for many years. Cumulative FDI inflows from Mauritius
     8.8%      8.0% 6.2%                             9.4% 4.7%3.6%               Mauritius
                                                                                                             reached US$61.2 billion in October 2011 since April 2000.
                            6.0%                                      7.7%       Singapore                   (US$7.0 billion in FY12 – Apr-Oct).
                                                                                                        ►    Singapore remained the second largest source of FDI in India
                                                                                 Japan
                                                                                                             in FY10 and FY11 (US$3.3 billion during FY12 – Apr-Oct).
                                                                                 Netherlands            ►    During FY12 (Apr-Oct), UK has emerged as the third largest
                                          41.0%
 36.0%                                                                           USA                         source of FDI in India. Between Apr-Oct 2011, India has
                                                                                                             received US$2.6 billion from the country (US$755 million in
                           35.0%                                    33.7%        Others                      FY11).
                                                                                                        ►    Another key trend is the emergence of Japan as the fourth
                                                                                                             largest source of FDI in India. Between Apr-Oct 2011, India
Source: Department of Industrial Policy & Promotion, Government of India
                                                                                                             has received US$1.8 billion from the country (US$1.6 billion
                                                                                                             in FY11).
 *Services includes financial and non-financial services, **Others includes computer software and hardware, petroleum and natural gas, chemicals, pharmaceuticals, hotel and tourism
 and other sectors


 Page 11                                                             India as an Investment destination
Recent FDI (Equity) investments in India
                                                                                              Major announcements
                               Amount of    Insurance
                               FDI equity   ►     Nippon Life, Japan’s largest insurance company has acquired 26% stake in Reliance Life for a sum of INR30.6 billion.
         Period                 inflows     Oil & Gas
                                  (US$      ►     BP has recently announced a partnership with Reliance Industries Limited (RIL), wherein BP would take a 30% stake
                                million)          in RIL’s 23 Oil and Gas blocks at a consideration of US$7.2 billion.
                                            Renewable energy
 July-Sep 2011                     5,695    ►     GE plans to invest US$50 million in its maiden renewable energy project in India with Greenko Group, a green energy
                                                  developer.
                                            Technology
 Apr-June 2011                    13,441
                                            ►     Japan’s SoftBank Corp has invested US$200 million in InMobi, an independent mobile advertising network provider.
                                            Cross Sector
 Jan–Mar 2011                      3,390
                                            ►     International Finance Corporation (IFC), the private sector funding arm of the World Bank Group, plans to invest upto
                                                  US$1 billion in India during FY12. It plans to focus on infrastructure, clean energy, energy efficiency and other
                                                  investments in socially important sectors such as water and healthcare.
 Oct–Dec 2010                      5,034
                                            Mining
                                            ►     Odisha government is expected to renew the MoU with South Korean steel major, Posco. Posco will set up a US$12
 Jul-Sep 2010                      5,233          billion 12-mtpa steel mill in the state.
                                            ►     Anglo-Australian mining giant, Rio Tinto has proposed to invest upto US$2 billion with local partners in India to develop
                                                  iron ore mines in the Indian state of Odisha over the next few years.
 Apr-June 2010                     5,772    Financial Services
                                            ►     Life Healthcare, South Africa’s second largest hospital chain, is acquiring a 26% stake in Max Healthcare for INR5.16
 Jan–Mar 2010                      4,968          billion, making it one of the largest foreign investment deals in the Indian healthcare sector
                                            Automotive

 Oct–Dec 2009                               ►     Force Motors has announced plans to invest INR7.5 billion in new product development and capacity augmentation.
                                   5,596
                                            ►     Volkswagen plans to invest INR17.28 billion in India over the next few years on tooling and vendor development
                                            ►     Honda Motorcycles has announced new unit in Karnataka
 Jul–Sep 2009                      8,235
                                            ►     Ford has announce d new unit in Gujarat
Source: Department of Industrial Policy &
Promotion, Government of India



Page 12                                              India as an Investment destination
Outward FDI – leading sectors and
destinations
                                      India: outward FDI                                               Break up of outward FDI by sector
               20
               18                                                                                    FY11
               16                                 18.8                                                       32.3%             Financial, Insurance, Real
               14
                                                                                                                               Estate and Business Services
                                                                       16.7
               12
 US$ billion




                                                         16.2                                                                  Manufacturing
               10
                8                          13.5
                                                                10.4                                                   11.3%   Wholesale, Retail, Trade,
                6
                4
                                                                                             34.7%                             Restaurants and Hotels
                                    5.0
                2                                                                                                     8.1%     Agriculture, Hunting, Forestry
                0     1.5    1.8
                                                                                                                               and Fishing
                     FY04    FY05   FY06   FY07   FY08   FY09   FY10   FY11                                   13.6%
                                                                                                                               Others
               Source: RBI                                                             Source: RBI


 ► Indian companies invested US$16.7 billion in overseas                                             Break up of outward FDI by destination
   joint ventures and wholly-owned subsidiaries during FY11
                                                                                                       FY11
   (compared to US$10.4 billion in FY10).
                                                                                                                                 Mauritius
 ► Approximately 56% of the investment was financed                                       30.1%                      19.6%
                                                                                                                                 Singapore
   through equity component and 44% through loans.
                                                                                                                                 Netherlands
 ► Services sector (including financial, insurance, real estate
                                                                                                                                 United States of America
   and business) witnessed the highest outward FDI                                                                      8.8%
   (US$5.8 billion) in FY11.                                                                                                     United Arab Emirates
                                                                                                                       8.0%
 ► Mauritius received the largest Indian outward FDI of                                                                          United Kingdom
                                                                                           22.5%
   approximately US$5 billion in FY11. Together, Mauritius,                                                            4.7%      Cyprus
   Singapore, Netherlands, United States, and United Arab                                             3.1%      3.2%             Others
   Emirates accounted for 71% of total outward FDI.
                                                                                        Source: RBI


Page 13                                                         India as an Investment destination
               Growth driver: exports
               Merchandise exports expected to reach US$500 billion in FY14
                                                                                                   ► IT services leader: India is a leading exporter of IT services in the world (55%
                                                                                                     share in global sourcing industry). During FY11, India’s services exports are
                           India’s exports – Goods and services                                      estimated to be US$132 billion.
              450                                                                                  ► US top IT services export destination: The US and the UK together account
              400                                                                                    for a dominant share of India’s IT-BPO exports (US$50 billion in 2010) at
              350                                                                                    approximately 61.5% and 18%, respectively.
US$ billion




              300                                                                                  ► Merchandise exports cross US$200 billion mark: During FY11, India’s
              250                                                                                    merchandise exports are estimated to have crossed the US$200 billion mark,
              200                                                                                    with exports of US$250.5 billion.
              150                                                                                  ► UAE top merchandise destination: UAE continued to be India’s top
              100                                                                                    destination for merchandise exports in FY11 with 13.7% share followed by the
               50                                                                                    US (10.2%), China (7.8%) and Hong Kong and Singapore with a share of
                0                                                                                    4.1% each.
                       FY03    FY04   FY05    FY06    FY07   FY08    FY09   FY10   FY11P FY12P
                                                                                          (Apr-    ► Global position: India accounts for approximately 1.4% of world merchandise
                                             Services               Goods                 Jun)
                                                                                                     trade. The government aims to double its share in global trade of goods and
                                                                                                     services by 2020 and expects the merchandise exports to reach US$500
                    Source: RBI and Ministry of Commerce
                    *Provisional
                                                                                                     billion in FY14.
                              Composition of services exports FY11 (P)                                         Composition of merchandise exports FY11(P)
                                                                                                                   14.7%
                                   44.7%
                                                                                                                                              Engineering goods
                                                                             Travel                                               12.3%
                                                                                                         16.5%                                Petroleum products
                                                                             Transportation
                                                                                                                                                 Gems & Jewellery
                                                                             Software services                                            8.9%   Chemicals & related products
                                                             18.2%                                                                               Textiles
                                                                             Business Services                23.9%
                    10.8%
                                                                                                                                     7.1%        Agri & allied products
                                                                             Others
                                                                                                                                 4.1%            Ores and minerals
                              11.6%                  14.7%
                                                                                                                       12.5%                     Others

                     Source: RBI                                                                        Source: DGFT


               Page 14                                                                 India as an Investment destination
Growth driver: investments

                                        New projects announced                                                                                                            Projects completed
                     9                                                                               1,600                                       1.6                       566                                         600
                                                                                 1,356                                                                                                               499
                     8   8.4                     1,319         1,271                                                                             1.4                528
                                                                                                                                                                                              454                      500
                     7                                                1,128                                                                             428
                                        1,109                                        1,060           1,200                                       1.2                          1.4
                         960                                                                                                                                                        348 376                348 376
                     6                                                                                                                                                                                                 400
                                                                         1,114               836                                                 1.0   1.1 1.1                                       1.2




                                                                                                                                  INR trillion
      INR trillion




                                                                                                           Number of deals




                                                                                                                                                                                                                             Number of deals
                     5                808
                                699                     5.7                                          800
                                                                6.2                                                                              0.8                                                                   300
                     4                                                                                                                                        305 303
                                       3.9                                                                                                       0.6
                     3                                                                                                                                            0.7               0.9                          0.8   200
                                               4.6                                                                                                                      0.8                                0.7
                     2                                                 3.8 3.1                       400                                         0.4
                                2.3                                            3.1 3.1                                                                                                     0.6 0.6
                                                                                                                                                                                                                       100
                     1                                                                       2.2                                                 0.2
                     0                                                                               0                                           0.0                                                                   0
                         4Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q12                                                                                  4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

                                Value of projects                     Number of new projects                                                                   Value of projects          Number of projects completed

                                      Trends in share of gross fixed
                                         capital formation (GFCF)
                                                                                                                             ►   India has maintained an average of approximately 30% in Gross
               18,000                                                                              40.0
                                                                        33.6 32.2
                                                                                  32.0 32.0                                      Fixed Capital Formation as a percentage of GDP between FY02
               16,000                                         30.5 31.8                            35.0
                                                     28.7                                                                        and FY11.
               14,000                                                                              30.0
     INR billion




                                         24.7
               12,000          22.9 23.6
                                                                                                   25.0                      ►   Projects worth approximately INR1.4 trillion were completed in the
               10,000
                                                                                                   20.0                          first half of FY12.
                8,000
                                                                                                   15.0
                6,000                                                                                                        ►   Approximately INR5.3 trillion worth of projects are expected to be
                4,000                                                                              10.0
                                                                                                                                 completed in FY12.
                2,000                                                                              5.0
                    0                                                                              0.0                                      ►     Four sectors, primarily electricity, petroleum products, steel,
                            FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11                                                                     and road transport are projected to witness substantial
                                                                                                                                                  amount of projects being completed during FY12.
                          Household sector                               Private corporate sector
                          Public sector                                  GFCF as % of GDP
Source: CMIE
Note: Data after FY04 is adjusted with base year as 2004-05




Page 15                                                                                  India as an Investment destination
  Growth driver: consumer spending
  Increasing middle class
                                                   Distribution of income by households* in India

                                  Urban population                                                                      Rural population
                        3%                                                                            2%                                    1%
                        2%                                 8%                                                     1%                                  3%
                                                                                              1%      3%
                        9%                                 5%                                         11%                                        7%
                        8%                                 15%
                                                                                                      14%                                     19%
                       23%                                 16%
                                                                                                                                              27%
                       26%
                                                           44%                                        68%
                                                                                                                                              41%
                       29%
                                                           12%
                     2009-10         INR million          2019-20                                   2009-10             INR million         2019-20
                Less than 0.075         0.075-0.15             0.15-0.30                      Less than 0.075           0.075-0.15               0.15-0.30
                0.30-0.50               0.50-1.00              1.00-1.50                      0.30-0.50                 0.50-1.00                1.00-1.50
                Above 1.50                                                                    Above 1.50
                          Consumption pattern                                                                     Saving pattern
                  Distribution of consumption expenditure 2010                                       People preferences in saving options 2010
                                                                                                                  27%         8%
                                                     Food, beverages and tobacco
                                                                                                                                            Bank Deposits
                                                     Clothing and Footwear
Approximately                     39%                Household goods                 40% of the                                             Stocks and MF
  40% of the                                         Housing                       people prefer    5%
 expenditure                                         Health                        Real Estate as
goes in food,          11%                                                                                                                  Insurance and pensions
                                               4%    Transport                      their saving
  beverages
                  3%                          4%     Communication                     option                                         20%
 and tobacco       2%
                                                     Education                                                                              Real Estate
                   3%                12%
                                                     Leisure
                     3%                              Hotels and catering                                                                    Gold
                          15%                                                                               40%
                                    4%               Miscellaneous goods
Source: Ambit research                                                              Source: ENAM Research


  Page 16                                                        India as an Investment destination
              Growth driver: consumer spends
              India expected to become the world's fifth-largest consuming country by 2025

                       Trends in public and private consumption
                                          Private consumption expenditure
              60000                       Government consumption expenditure               70.5           ►   By 2025, India is expected to become the world's fifth-
                                                                                           70                 largest consuming country from its twelfth position in
              50000                       Consumption as % of GDP
                                                                                           69.5
                                                                                           69                 2010
              40000
INR billion




                                                                                           68.5
              30000                                                                        68
                                                                                                          ►   India has approximately 222 million households, with
                                                                                           67.5               more than 30% of the population living in 5,000 cities
              20000                                                                        67                 and towns.
              10000                                                                        66.5
                                                                                           66             ►   13 million people enter India’s urban work force each
                  0                                                                        65.5               year.
                        FY05       FY06     FY07      FY08   FY09    FY10         FY11
        Source: RBI and CMIE
                                                                                                          ►   According to the recent global survey of online
                                      Consumption to boom across categories                                   consumers, conducted in more than 51 nations
                                                                                                              worldwide, the Indian consumers were found to be the
                                                   Units      2010      2020             CAGR (2010-20)
                                                                                                              most optimistic.
                Organised Retail                   US$ bn      24           266               27%
                                                                                                          ►   Significant rural consumption is also a key driver for
                Air Conditioners                   Mn p.a.     3            18                22%
                                                                                                              India’s growth as it constitutes 70% to the total
                Home Mortgage*                     US$ bn      88           646               22%             population.
                Cars                               Mn p.a.     2            12                20%
                                                                                                          ►   Approximately 56% of the national income is
                                                   Mn                                                         generated through rural customers.
                Digital Pay TV**                               24           116               17%
                                               subscribers
                                                                                                          ►   Consumer durables form an important part of the rural
                Refrigerators                      Mn p.a.     6            25                16%             consumption. Out of the total consumer durables
                Packed foods                       US$ bn      22           89                15%
                                                                                                              demand in India, 59% is generated through rural
                                                                                                              customers. In addition, they contribute around 53% to
                2-Wheelers                         Mn p.a.     9            35                14%
                                                                                                              the total FMCG sales.
                HPC Products                       US$ bn      10           34                13%
              Source: ENAM Research
              *Mortgage expressed as total housing loan outstanding
              **DTH is expressed as total subscriber base


              Page 17                                                              India as an Investment destination
     Growth enabler: changing demographics
     India has low median age
                                                                                                                                         Age group
                                                                                                                                   1%       80+      1%
                                                                                                                                    1%               1%
     1400        Indicating favorable demographics (age groups)
                                                                                                                                  2%        70-74       2%
                                                                                                                               3%                            3%
                                                                                                                                3%                           3%
     1200                                                                                                                          2%                  2%                     2021       2001
                                                                                                                            4%              60-64                 4%
                                                                                                                                3%                           3%
                                                                                                                         5%                                         4%
     1000                                                         410                                                          3%                            3%
                                                                                                                      5%                    50-54                     5%
                                                                                                                             3%                                   4%
                              300                                                                                   6%                                                  6%
Millions




           800                                                                                                           5%                                          5%
                                                                                                                   6%                       40-44                          6%
                                                                                                                       5%                                               6%
           600                                                    375                                           7%                                                             8%
                              290                                                                                7%                                                         7%
                                                                                                           8%                               30-34                                   9%
                                                                                                               7%                                                            7%
           400                                                                                          9%                                                                           9%
                                                                                                          -8%                                                                   8%
                                                                                                         9%                                 20-24                                   9%
                                                                                                         9%                                                                        9%
           200                410                                 415                                       8%                                                                     9%
                                                                                                       9%                                                                               10%
                                                                                                            8%                              10-14                                  9%
            0                                                                             12%                                                                                                 12%
                                                                                                            8%                                                                     9%
                                                                                        12%                                                                                                    13%
                              2001                               2013                                       8%                               0-4                                  8%
                                                                                                11%                                                                                       11%
                                    0-19   20-34    35 & above                                                         Female                                 Male
             Source: ENAM Research                                                      Source: India Labour Report, 2009


                                                                     Total employment in India (millions)
                          Low median age
50                                                                                                               828.95             ►     In 2010, India had a dependency
45
40
                                                                                                                                          ratio of 56% against China
                                                                                                      645.09
35                                                                                                                                        (39%), the US (50%) and the UK
                                                                                      516.41
30                                                                           506
                                                                                                                                          (51%).
25                                                 2000
20                                                 2025          337.88                                                             ►     By 2030, India will have a lower
15                                                                                                                                        dependency ratio of 45% against
10                                                                                                                                        China (49%), US (61%) and UK
 5
                                                                                                                                          (61%).
 0
             India   US   China Russia     UK                2004-05       2009-10   2015-16      2020-21       2025-26

            Source: CLSA research                                Source: India Labour Report, 2009; Ministry of Labour


     Page 18                                                              India as an Investment destination
Growth enabler: stable government
The Eleventh Plan progress report
                                  Achievements                                                                                   Shortfalls
                       Telecom                                Health                                   Infra             Energy              Education             Health
               899.8                                      100%                                                                                  15%              100%
                                           36.2%                                                      511.8
                                                                  99.9%                                                 62,374
                                                                                                                                  57,776
         600                       25%                                                                                                                12%


                                                                                                            167.41

                                                                                                                                                                         32.1%

          Telecom                Rural tele-density      Clean water for all                           Port capacity     Energy capacity        GER higher        Total Fertility
         subscribers                                       (% coverage)                               addition (MTPA)     addition (MW)          education       Rate (% states
          (millions)         Target          Achievement                                                                 Target        Achievement                 ~TFR 2.1)

Sector                 Plan target                     Achievement                   Sector              Plan target                              Shortfall

Telecom                Telecom subscriber             899.78 million subscribers     Infrastructure      2,000 new railway lines to be           771 new lines constructed till FY10
                       base of 600 million            (Aug 2011).                                        constructed
                                                      Rural tele-density of 36.2%                        Capacity addition of 511.80             Capacity addition of 167.4 MTPA
                       Rural tele-density of
                                                      (Aug 2011).                                        MTPA at ports                           (32.7%) achieved till Sep 2011
                       25%.
                                                      Out of 55,067 uncovered        Energy              Total capacity addition of 62,374       57775.62 MW (92.6%) added till
Health                 Clean water for all
                                                      habitations, only 384 remain                       MW                                      Sep 2011.
                                                      uncovered
                                                                                                         Electrification of 1,18,499 villages    99,148 villages electrified (Sep
Industry               Easing FDI norms               FDI upto 100% allowed in
                                                                                                                                                 2011)
                                                      many sectors
                                                                                     Education           Literacy rate of 80%                     74% (Census 2011)
   Despite significant achievements, government                                                          30 new central universities to be        16 central universities set up till
    needs to relook its development priorities in                                                        set up                                   now
                   shortfall areas                                                   Health              Sex ratio of 935 females per 1000 Sex ratio of 914 (Census 2011)
                                                                                                         males in 0-6 years age group.



Page 19                                                                India as an Investment destination
Growth enabler: robust financial institutions
Maintaining stability
                                                                                                                      Banking infrastructure in India
 ►   India has a strong and stable financial market, regulated by RBI.SEBI, the                              no. of branches of SCBs (As on 31 March 2011)
     strong and independent capital markets regulator is committed to develop
                                                                                                                                                               45,460
     and regulate markets in a systematic way.
 ►   India’s capital markets are well established with a presence of 20 stock                                                                                  Public sector
                                                                                                                                 Private Sector
     exchanges that constitute the market for securities issued by the                                           11,968                                           banks
                                                                                                                                     Banks
     government and the corporate entities.
                                                                                                                      Foreign
 ►   BSE is the world’s largest stock exchange in terms of number of listed                            316
                                                                                                                      Banks
     companies and the NSE is the world's third largest stock exchange in terms
     of number of transactions.                                                                                       SCBs credit to GDP ratio
 ►   The Multi-Commodity Exchange of India (MCX) is among the top three
                                                                                       60%                                                           52.0% 53.1% 55.3% 53.9%
                                                                                                                                           49.0%
     bullion exchanges and top four energy exchanges of the world. NSDL, the           50%                                            44.3%
     first and largest depository for equity market in India manages more than10                                              37.1%
                                                                                       40%              32.2% 33.1%
     million demat accounts.                                                                       28.1%
                                                                                       30%
 ►   The Indian banking sector regulated by the Reserve Bank of India (RBI)
                                                                                       20%
     consists of the public sector banks (26), private banks (21) and foreign
     banks (32) with a total asset size of approximately INR65 trillion at end-        10%
     FY11 (US$1.4 trillion).                                                               0%
                                                                                                   FY02       FY03    FY04    FY05    FY06   FY07    FY08    FY09    FY10     FY11
 ►   Public sector banks dominate the banking industry with 74% of the assets
     held as of FY11. However private sector banking is growing at a rapid pace
     with 11,968 branches at the end of FY11. RBI has recently come out with                                         Credit – deposit ratio of SCBs
                                                                                                                                     73.5    74.6                     75.7
     new banking licenses which will promote private banking in the country.          80                                      70.1                  72.4
                                                                                      70                               62.6
                                                                                                       56.9                                                                  75.2
 ►   Gross NPAs of India’s Scheduled Commercial Banks (SCBs) have declined            60        53.8           55.9                                         72.2
     from 15.7% of net advances in FY97 to 2.24% in FY11. The credit-deposit          50
     ratio of Indian SCBs stood at 75.22 as on 16 December 2011 (74.18 as on          40
     18 November 2011). Bank credit and deposits have grown (y-o-y) by 17.1%          30
     and 18.0% respectively as of December 2011.                                      20
 ►   The Government has made provision for recapitalization of banks worth            10
     INR65 billion in FY12 budget, to enable banks to maintain a minimum Tier I        0
                                                                                            FY02       FY03    FY04    FY05   FY06   FY07    FY08   FY09    FY10   FY11 FY12*
     capital adequacy ratio of 8%.
                                                                                     *As of 16 December 2011
Source: RBI, NSDL website
Page 20                                                        India as an Investment destination
  Inflation above sustainable levels, RBI stops
  rate hikes
 12%                    Wholesale price index
         10.3% 9.8%                                         9.8%                     ► WPI in Jan 2012 stood at 6.6% y-o-y, lower than that in Dec
 10%                                       9.7%                    9.7%
         10.6%                                     9.1%                                2011 (7.5%).
                         8.6%            8.3%
                                                       9.4%9.2% 9.7%      9.1%       ► RBI has revised policy rates regularly to suck out excess
  8%             8.5%    8.6% 7.5%9.4%
                              8.4%              8.7%
                                                                          7.5%         liquidity from the financial system using its monetary policy.
  6%                                                                          6.6%           ► In October 2011, it increased the repo rate by 25 basis
  4%
                                                                                               points to 8.5%. In December 2011, the repo rate remained
                                                                                               at the same level as in October and November 2011.
  2%                                                                                         ► In line with RBI’s hardening monetary stance, average
                                                                                               base rates of banks have also been continuously rising.
  0%



Source: Central Statistical Organization
Note: Base year for calculation of WPI is 2004-05                  Hike in Repo

  8.5%
  8.0%                  Monetary policy action                                       11.0%
                                                                                                            Average base rates
  7.5%                                                                               10.5%

  7.0%                                                                               10.0%
                                                                                     9.5%
  6.5%
                                                                                     9.0%
  6.0%
                                                                                     8.5%
  5.5%                                                                    CRR                                                          SBI
                                                                                     8.0%
                                                                                                                                       PNB
  5.0%                                                                    Repo       7.5%                                              ICICI
                                                                                                                                       HDFC
  4.5%                                                                               7.0%


 Source: RBI
                                                                                      Source: CMIE


  Page 21                                                          India as an Investment destination
                    M&A activity – inbound deals dominate the
                    landscape
                    Number of deals and value
              80                                                                                  1,600                   ►   M&A activity in India picked up strong pace in 2010, however witnessed a decline in
                                                          1,409                                                               2011 due to the volatility in the markets and cautious approach of the companies.
                                                1,391
                                                                  1,314                                                           ►   During 2011, 963 deals worth US$39.3 billion (By value: Inbound – 62%; Outbound –
                                                                                 1,196
              60                                                                                  1,200                               24%; Domestic – 14%) were announced.
                                    1,153                                             963
                                                                         1,201                                            ►   During 2011, oil and gas sector attracted 23.2% of the total M&A deal value followed
                                                                                 62                                           by telecommunications services (14.5%) and industrial products (8.2%).
US$ billion




                                                          66




                                                                                                        Number of deals
              40               727                                                                800                     ►   Australia has emerged as the top destination for outbound M&A activity from India
                                                   45                                                                         accounting for approximately 38.9% of total outbound deals (by value) during 2011,
                     544                                           45
                           674
                                                                                        39                                    followed by US (14.4%) and UK (10.9%).
              20                                                                                  400                     ►   UK, US and Germany have emerged as the top M&A investors (by value) in India.
                                           31                                                                             ►   Major deals during 2011 include:
                                                                           19
                                                                                                                                • Outbound: Mundra Port & Special Economic Zone Ltd {MPSEZ} – Abbot Point
                     8
              0            6        6                                                             0                                 Coal Terminal (US$1.9 billion)
                    CY02   CY03     CY04   CY05    CY06   CYC07   CY08    CY09   CY10    CY11
                                                                                                                                • Domestic: Sesa Goa Ltd - Cairn India Ltd (US$1.5 billion)
                                  Value of deals                   Number of deals                                              • Inbound: Reliance Industries Ltd – BP PLC (US$7.2 billion)

                    Source: Thomson ONE Banker; Ernst & Young research                                                          • Inbound: Vodafone Essar Ltd. – Vodafone Group Plc (US$5 billion)




                                                                                                % Break-up of number of deals
                                  2002                                                                                    2010                                                 2011
                                                  8%
                                                                                                                                      22%                                                 19%




                                                                     Outbound                                                                      Outbound   50%                                        Outbound
                                                          30%
                                                                     Inbound            57%
                                                                                                                                                   Inbound                                               Inbound
                                                                     Domestic                                                                      Domestic                                              Domestic
              62%                                                                                                                       21%
                                                                                                                                                                                             31%



                    Source: Thomson One Banker
                    Page 22                                                                       India as an Investment destination
    PE activity touched US$9.5 billion in 2011
                  PE/VC activity in India                                                                                  Average deal size
                  20                                                                 600                                   60
                  18                                                          516
                  16                                                                 500




                                                                                           Number of deals
                  14                  365                                                                                  45                 53




                                                                                                             US$ million
                                                                                     400
                                                   334
    US$ billion




                  12       296
                                                                     282                                                                               39
                  10                   17.2                                          300                                   30
                                                            180
                   8                                                                                                                                                    30
                                                   10.5                      9.5     200                                          29
                   6        7.4
                                                                     7.0                                                   15                                  23
                   4                                                                 100                                                                                           25
                   2                                        3.5
                   0                                                                 0                                     0
                            2006       2007        2008    2009     2010     2011                                                 2006       2007      2008   2009     2010       2011
                                  Value of deals          Number of deals

                   Note: In 2011, deal value was not disclosed for 134 deals                                                    Source: VCCEdge; AVCJ; Ernst & Young research
                   Source: VCCEdge; AVCJ; Ernst & Young research
                                                                                                                                  Sectoral distribution of PE investments – by value,
►       PE activity witnessed tremendous increase in the number of deals in 2011 compared to 2010:
                                                                                                                                                         2011
                       ►         There were 516 PE deals worth US$9.5 billion in 2011.
                       ►         Average deal size stood at US$25 million in 2011.                                                                                      Infrastructure
                                                                                                                                               7%     7%
                                                                                                                                                              5%        Real Estate
►       Major deals during 2011 include:
                                                                                                                                         9%                    4%
                   ►   MapleTree India China invested US$156.6 million in Assetz Global Technology Park                                                                 Financial services
                       (November 2011)                                                                                                                         4%       Technology
                                                                                                                                       15%                      3%
                   ►   Goldman Sachs invested US$204 million in ReNew Wind Power Pvt. Ltd. (Sep 2011)                                                                   Retail and consumer products
                   ►   Blackstone Group invested US$200 million in Manyata Promoters Pvt. Ltd. (July 2011)                                                              Industrial products
                                                                                                                                                              16%
                   ►   Apollo Management invested US$290 million in Welspun Corporation (June 2011)                                                                     Healthcare
                   ►   Macquarie SBI Infrastructure Fund invested US$200 million in GMR Airports Holding                                                                Metals and mining
                                                                                                                                                29%
                       Limited (Apr 2011)                                                                                                                               Media and entertainment
                   ►   Bain Capital and GIC invested US$850 million in Hero Honda (Feb 2011)                                                                            Others

                                                                                                                                Source: Factiva; ISI Emerging Markets; VC Circle; Mergermarkets


    Page 23                                                                     India as an Investment destination
Process of investing into India
  Foreign investment – Indian scenario

                                                                                 Foreign
                                                                               Investments




                                                                            Foreign Venture                                                         Investment on
    Foreign Direct                     Foreign Portfolio                                                              Other
                                                                                Capital                                                             non-repatriable
     Investments                         Investments                                                               Investments
                                                                             Investments                                                                Basis




Automatic      Government                              Indi, NRIs,              SEBI regd.                        G-Sec, NCDs,                              NRIs,
                                        FIIs                                                                                                                PIOs
 Route*          Route*                                   PIOs                    FVCIs                               etc



                                                                                    VCF,                                             NRIs,
                                                                                                              FIIs
                                                                                   IVCUs                                             PIOs


   *Foreign Direct Investments (FDI) can be made in India under two routes i.e. Automatic Route and Government Route. Under the Government Route, prior
   approval is required to be obtained from Foreign Investment Promotion Board (FIPB) for making foreign investments into India. Under the Automatic Route no
   approval is required for making investments into India.

   Further, the FDI Policy also provides for sectoral caps on the limit of foreign investments for certain sectors – telecom services (74%), banking (74%), airline (
   49% to 74%), insurance ( 26%)

   FDI is not permitted in certain sector such as lottery, gambling, real estate business, etc



  Page 25                                                        India as an Investment destination
Forms of business presence in India

                                                 Foreign
                                                Company




                Operates as a                                                Establishes an
              foreign company                                               Indian company




    Liaison        Project          Branch                             Joint           Wholly Owned
     Office        Office            Office                          Ventures           Subsidiary


Other forms of business
►    Franchisee and distributor arrangements (no direct presence)
►    Foreign technology collaborations (no direct presence)
►    Limited Liability Partnership (‘LLP’)


Page 26                                India as an Investment destination
Investment instruments


           Investment in India can be made through following instruments


          Equity Capital                                             Fully Convertible
          Carries voting rights                                      Debentures (“FCD”)
          Can have differential rights                               Tax break for interest cost



                                       Fully Convertible
                                       Preference Capital
                                       Carries preferential right in
                                       dividend with restrictions
                                       on dividend rate

                       Foreign investment in Non-convertible, Optionally convertible
                       or Partially convertible Preference shares/ Debentures would
                       generally be considered as debt and shall require compliance
                                             with ECB guidelines



Page 27                               India as an Investment destination
Tax Environment in India
Overview of Direct Taxes in India

            Tax                                    Nature of levy                                              Rate *


 On Indian entity

 Corporate Tax Rate            Tax on net income                                 Indian Co’s. – 30%

 Minimum Alternate Tax         Payable if tax on total income under normal       18.5% of book profits
                               provisions is lower than book profits disclosed
                               in financials (after prescribed adjustments)
 On repatriation

 Dividend Distribution Tax     Tax on declaration/distribution/payment of        15% (paid by the Indian company declaring dividend)
 (DDT)                         dividend                                          Exempt in the hands of shareholders. Further, depending on
                                                                                 the jurisdiction, credit for DDT may be available, so net
                                                                                 effective tax rate may be reduced to zero
 Capital Gains                 Tax on transfer of capital assets                 Capital gains on listed securities traded on recognized
                                                                                 stock exchange:
                                                                                 Long term capital gains (LTCG): Nil
                                                                                 Short term capital gains (STCG): 15%
                                                                                 Other Capital Gains:
                                                                                 LTCG : 20% (subject to indexation)
                                                                                 STCG :
                                                                                 -  Foreign Co’s – 40%
                                                                                 -  Depending on the jurisdiction from where investments are
                                                                                    made, tax on capital gains in on repatriation may be
                                                                                    reduced to zero
 *excluding surcharge (applicable if total income exceeds INR10 million; 5% for domestic companies and 2% for foreign companies), and
 education cess @3% levied on tax plus surcharge



Page 29                                               India as an Investment destination
Overview of Indirect Taxes in India

      Indirect tax        Taxing Authority            Applicable on                 General Effective Rate

 Customs Duty            Central Government    Import of goods from outside   Current peak effective Customs duty
                                               India                          is 26.85%


 Excise Duty             Central Government    Manufacture of goods in        10.30%
                                               India
 Value Added Tax (VAT)   State Governments     Sale of goods within the       Varies from state to state; generally
                                               state                          ranges between 4% to 15%

 Central Sales Tax       Central Government    Inter-state sale of goods      2%/ 3% / 4%/ 12.5%/15%
 (CST)
 Service Tax             Central Government    Provision of specified         10.30%
                                               categories of services

 Entry Tax/ Octroi       State Governments/    Entry of goods into a State/   Varies from state to state
                         Local Authorities     local area for consumption,
                                               use or sale

 Research &              Central Government    Import of technology into      5%
 Development Cess                              India under foreign
                                               collaboration




Page 30                                  India as an Investment destination
Recent regulatory updates
Direct Taxes Code Bill, 2010

►    Government of India’s (GoI’s) objective to revise, consolidate
     and simplify direct tax laws
                                                                                                           Ambiguity                        Complexity
►    Direct Taxes Code Bill (DTC 2010) was placed before the
     Indian Parliament on 30 August 2010

►    DTC 2010 is proposed to be implemented with effect from 1
     April 2012
                                                                                                                         Constraints with
                                                                                          Inconsistent                    The Current                    Increased
                                                                                          interpretation                  Income Tax                      litigation
                                                                                                                               Act
              Provide stability on tax             Improve efficiency
              regime based on                        by eliminating
              principles of taxation on             distortion in tax
              best international                       structure
              practices
                                                                                                           Conflicting                      Increased
                                                                                                           judgments                        compliance


                                Thrust for DTC
        Remove                                                     Simplify the tax
      ambiguity to                                                 structure for the
    foster voluntary                                              average tax payer      Key proposals impacting international transactions
      compliance

                                                                                         ►   Modification of residence rule
                                                                                         ►   Introduction of Controlled Foreign Company (CFC) rules
                                  Introduce moderate
                                  level of taxation and
                                                                                         ►   Specific provision dealing with indirect transfer of shares
                                  expand the tax base                                    ►   Introduction of Branch Profit Tax
                                                                                         ►   General Anti Avoidance Rules (GAAR) to be legislated



Page 32                                                            India as an Investment destination
Goods and Services Tax

►     At present, various Indirect taxes are
      levied at both Central and State level

►     Under the current system, not all kinds of
      Indirect taxes are creditable against each                                                     Less tax cascading
      other, leading to tax cascading                                                               Increased investment
                                                                                        Improved competitive position of Indian producers
►     A system of unified Goods and Service
      Tax (GST), has been proposed to bring a
      fundamental shift in the way business                                                      Improved cash flow position
      transactions are taxed in India

►     GST is proposed as a comprehensive
      value added tax levied on the supply of
                                                                                                  Broader base, lower taxes
      all goods and services (except for a
      negative list)

►     It is proposed that various State and
      Central level Indirect taxes such as                                                    Simpler and rational tax structure
      Excise duty, State level taxes on sale of
      goods, Service tax would be subsumed
      under GST
                                                                                        Improved administration (simplicity and lower
                                                                                                  cost of administration)
►     GST is expected to have a dual structure
      with Centre and State levying taxes on
      the same supply of goods/ services

►     GST is expected to reduce tax cascading
      and accordingly, the overall incidence of                            Advantages of GST
      taxes


Page 33                                            India as an Investment destination
Incentives under State Industrial Policy

►   State Governments in order to promote                               Benefits available - Illustrative
    industries in their respective states provide
    certain additional incentives over and above                  Exemption/ deferral from Value Added Tax or flow back of
    incentives provided under the Indirect tax laws              input credit for a initial period of years, capital subsidy, etc,
                                                                            subject to certain specified conditions
►   These incentives are primarily based on following
    criteria:

    ►     Amount of investment;                                                      Exemption from Entry tax
    ►     Employment;
    ►     Location; and
    ►     Nature of Project                                      Exemption/ concessional rate of electricity duty / electricity
                                                                              generation tax/ electricity fees
►   These incentives are usually available in respect
    of new industrial projects/ substantial expansion
    of existing plant/ unit
                                                                          Waiver/ concessional rate of stamp duty
    Please note that the availability and extent of the
    benefits under State industrial policies vary
    greatly from State to State
                                                                 Reservation of products for exclusive manufacture by the
                                                                                           SSI


                                                                  Other incentives such as concessional rates for land in
                                                                  identified areas may also be granted on case to case
                                                                                          basis



Page 34                                         India as an Investment destination
National Manufacturing Policy

►    For sustainable growth of the manufacturing sector, Government of India has recently introduced
     the National Manufacturing Policy, 2011 (NMP)

                Objectives                                                 Proposed Policy Instruments


    Increase manufacturing growth to 12-14%
                                                                                   Leveraging
                                                                                 infrastructure    Rationalization
                                                                                    deficit &     and simplification
          Increase the rate of job creation                                       government        of business
                                                                                  procurement       regulations
                                                                                                                      Simple and
                                                               Development of                                       expeditious exit
        Creation of appropriate skill sets                      Special Focus                                        mechanism for
                                                                 sectors and                                      closure of sick units
                                                             implementation of                                    while protecting the
                                                              supporting Trade                                      labour interests
                                                                   Policy
        Increase domestic value addition
                                                                                                                Financial
                                                                    Incentives for                           & institutional
                                                                       Small and                           mechanisms for
    Enhancement of global competiveness of
                                                                   medium Sector             Industrial        technology
            Indian manufacturing                                                                             development
                                                                      Enterprises          training and
                                                                          (SMEs)              skill up-    (including green
                                                                                             gradation        technology)
  Ensuring sustainability of growth particularly                                            measures
    with regard to the environmental impact



Page 35                                            India as an Investment destination
Sector overview
Roads and highways
Overview

 Sector fundamentals
 ►   India has the world’s second largest road network comprising a total length of 4.24 million km and accounting for 87.4% of passenger and
     60% of freight traffic respectively.
 ►   As of October 2011, the total length of National Highways (NH) length was 66,800 km accounting for only 2% of the country’s total road
     length and approximately 40% of the total traffic.
 ►   In order to improve the road infrastructure, the Government of India (GoI) has undertaken several initiatives such as the launch of National
     Highway Development Program (NHDP), Pradhan Mantri Gram Sadak Yojana (PMGSY) and Special Accelerated Road Development
     Program in the North East (SARDP-NE).
 ►   Several policy measures such as standardization of bidding documents, model concession agreements, project restructuring and viability
     gap funding have been announced to promote public private partnership (PPP) and to increase the financial viability.

 Investment scenario
 ►   The Ministry of Road Transport and Highways (MoRTH) has set a                          Investments in Roads and highways
     target to construct 20 km of national highway everyday.                                           (US$ billion)
 ►   Total investment in the 12th Five Year Plan is estimated to be US$100      120
                                                                                                                                         107
     billion as against US$61 billion in the 11th Five Year Plan.
 ►   Private investment is expected to cross US$40 billion in the 12th plan
     as against US$10 billion in the 11th plan.                                  80
                                                                                                                    61
 ►   During the 11th Plan, NHAI awarded 12,138 km of projects worth
     US$18 billion to the private sector.
 ►   Companies had the opportunity to bid for around 20,236 km of road           40            28
     length, which were yet to be awarded under the NHDP as of
     November 2011.
 ►   Foreign players including ITD Cementation, Berhad (Malaysia), Isolux         0
     Corson and IJM Corporation have entered the road sector.                         10th Five Year Plan 11th Five Year Plan 12th Five Year Plan



Page 37                                                   India as an Investment destination
Roads and highways
Opportunities

 ►   Since 2005, as a policy decision all projects under the NHDP are awarded on a PPP basis through competitive bidding, providing a
     substantial opportunity for private players
 ►   Many NH stretches have already been awarded to private companies on a Build-Operate-Transfer (BOT) basis.
 ►   100% income tax exemption for a period of 10 years is provided to attract private investors
 ►   To attract foreign investment, 100% FDI under the automatic route is permitted for all road development projects
 ►   In the 12th Five Year Plan, private sector is expected to provide 40% of the total investment in the sector, creating a significant opportunity
     for private players.


                        ►   Estimated investment requirement of US$75 billion to develop 36,765 km under NHAI work plan
 NHAI Work
                        ►   An investment of approximately US$45 billion on four-laning of 50,000 km of national highways
 Plans
                        ►   16,000 km of NH have been four-laned, while another 10,500 km is under implementation, all through PPP


                        ►   Ten mega national highway projects (worth more than US$1 billion each) have been identified to be developed
 Mega projects
                            through PPP



                        ►   New expressway program outlined to build 18,637 km of greenfield national expressways by 2022
 Expressways            ►   1,000 km of expressways are expected to be completed over the next 4 years at an estimated cost of US$5 billion by
                            private players on BOT basis


                        ►   In PPP, around 149 private state road projects involving a total cost of US$15 billion are in pipeline.
 State                  ►   World Bank and Asian Development Bank approved projects include the Karnataka State Highway Improvement
 highways and               Project-II, Madhya Pradesh State Roads Project-III and the North-Eastern State Roads Investment Program.
 rural roads            ►   Private investment of around US$2 billion has been mobilized by states and another US$12 billion is under way



Page 38                                                  India as an Investment destination
Railways
Overview

 Sector fundamentals
 ►   Indian Railways (IR) constitutes the third largest rail network in the world spanning over 64,000 km.
 ►   The IR carries approximately 35% of country’s freight traffic .
 ►   In 2010-11, IR’s total earnings increased by 8.5% y-o-y to INR945 billion, freight accounted for 70% of it.
 ►   Freight traffic doubled from 493 million tonnes (mt) in 2001-02 to 924 mt in 2010-11.
 ►   Freight and passenger traffic are expected to grow to 2,200 mt and 15 billion respectively by 2019-20.


 Investment scenario

 ►   Total investment in 12th Five Year Plan is estimated to be US$64                               Investments in Railways
     billion as against US$44 billion in the 11th Five Year Plan.                                         (US$ billion)
 ►   During the 11th Five Year Plan, IR garnered only 4% of the total            80
     investment of US$44 billion through PPP projects.                                                                               64
 ►   Investment of approximately US$35 billion are planned for rail-based
                                                                                 60
     mass transport projects by 2021 including US$6 billion for Mumbai
     monorail and US$1.2 for Bengaluru monorail project.                                                           44
 ►   IR’s port connectivity projects received US$800 million in private
                                                                                 40
     investment through PPP.
 ►   The Vision 2020 document of IR estimates that a total investment of                       22
     US$300 billion is required till 2019-20.                                    20



                                                                                  0
                                                                                      10th Five Year Plan 11th Five Year Plan 12th Five Year Plan




Page 39                                                  India as an Investment destination
Railways
Opportunities
 ►     IR considers PPPs as the most proffered route for areas such as world-class railway stations, high speed corridors, multi-functional
       complexes, ports and other connectivity works.
 ►     Special freight terminal operator scheme, private freight terminal scheme and the revised 3i investment policy are expected to attract private
       participation.

                               ►   At present, metro projects in Mumbai, Chennai, Jaipur, Bengaluru, Delhi and Gurgaon are under development
                                   entailing a cumulative investment of US$12 billion
 Mass Rapid Transport          ►   Metro rail in seven more cities are at planning stage including Ahemdabad, Chandigarh, Kanpur, Kochi, Ludhiana,
 System (MRTS)
                                   Lucknow and Pune.
                               ►   Besides metro systems, light rail and monorail are planned in Mumbai, Delhi, Ahemdabad and Kolkata.

                               ►   Eastern corridor (1,839 km) and Western corridor (1,534 km) entails an investment of US$10 billion.
 Dedicated Freight Corridors   ►   Four new freight corridors- east-west (Kolkata-Mumbai); north-south (Delhi-Chennai); east cost (Kharagpur-
 (DFC)
                                   Vijayawada) and south (Chennai-Goa) are at preliminary survey stage.
                               ►   Once the projects are open for bidding, they will provide substantial opportunity for private players.


 Modernization of Stations     ►   50 railway stations are planned to be developed as world-class stations through PPP mode


                               ►   Six High speed passenger corridors has been planned at an approximate cost of US$ 20 billion each
 High speed rail corridor      ►   These include Delhi-Chandigarh-Amritsar, Pune-Mumbai-Ahemdabad, Hyderabad-Vijaywada-Chennai, Chennai-
                                   Bengaluru-Ernakulam, Howrah-Haldia and Delhi-Agra-Lucknow-Varanasi-Patna


                               ►   IR initiated PPP in container train operations in 2006
 Container train               ►   Till date, 15 companies have obtained licenses to run container trains, 180 rakes have been procured, nine inland
 operations                        container depots have started operations and 15 more are under construction
                               ►   Private sector has invested approximately US$1.2 billion so far for container train operations


Page 40                                                      India as an Investment destination
Construction
Overview

    Sector fundamentals

►    The Indian construction industry is among the top 10 construction industries globally with a value of US$130 billion in FY11
►    The construction sector accounted for 8.1% of Indian GDP in FY11
►    Most construction projects are now implemented through the Engineering, Procurement and Construction (EPC) mode.
►    The Indian EPC sector has over 150 local and global participants and a multitude of stakeholders
►    The various operational segments on which EPC industry is dependent are explained below

         Segment                                                                    Insight
    Infrastructure         Increasing opportunities in the sector have attracted new entrants
    Building               Highly unorganized and dominated by local contractors. Foreign players only operate as PMCs, architects and
    construction           consultants
    Oil & Gas EPC          There is high competition from foreign participants, especially for offshore contracts
    Power EPC              Dominated by equipment manufacturers, especially from South-East Asia
    Specialized EPC        This space comprises players who have carved a niche for themselves in segments such as hydel-tunneling, marine
                           construction, power transmission, equipment supply or industrial construction.


    Investment scenario

►    The government of India has planned an investment of US$1 trillion to be spent on infrastructure development in the 12th Five year plan (2012-
     17), reflecting a growth of more than 100% over 11th Five Year Plan in which government planned investment of US$500 billion.
►    Around 50% of investment in 12th plan is expected to come from private sector in areas such as roads, power, ports, water and sanitation,
     telecom, oil and gas etc.
►    The estimated opportunity size for EPC sector from infrastructure sector alone come out to US$370 billion (~42% of total spend on
     infrastructure) through 2012-17.




Page 41                                                  India as an Investment destination
Construction
Opportunities

                     ►   Construction intensity in power sector projects is around 38% which would create an opportunity of US$104
 Power
                         billion through 2012-17 for construction players



                     ►   Indian has world’s second largest road network, comprising a length of 4.2 million km, accounting for 87.4%
                         of passenger traffic and 60% of freight traffic.
 Roads and bridges   ►   Total investment in 12th plan is expected to be US$107 billion
                     ►   Construction intensity in roads and bridges sector is around 65% which would create an opportunity of
                         ~US$69 billion through 2012-17 for construction players.



                     ►   The 12th five year plan envisages an investment of US$87 billion for irrigation sector.
 Irrigation          ►   Construction intensity in irrigation sector is around 75% which would create an opportunity of US$65 billion
                         through 2012-17 for EPC players.




                     ►   Indian Railways network spans over 64,000 route km, making it the world’s third largest rail network in terms
                         of size.
 Railways            ►   Total investment in 12th plan is expected to be US$64 billion.
                     ►   Construction intensity in railways sector is around 78% which would create an opportunity of ~US$50 billion
                         through 2012-17 for construction players.




Page 42                                     India as an Investment destination
Logistics
Overview

 Sector fundamentals
 ►        The Indian logistics industry recorded revenues of US$82.10 billion in 2010, registering a 9.2% growth, y-o-y.
 ►        It is further expected to cross the US$200 billion figure by 2020.
 ►        The share of the organized segment is less than 5% ,which provides enough scope for consolidation.
 ►        The key drivers for the industry include:
                ► Strong growth in demand from sectors such as retail, automotives, pharmaceuticals, food processing and textiles.
                ► Increasing Government investments in infrastructure sector
 ►        Government has planned investment of around US$1 trillion in infrastructure development during the Twelfth Five-Year Plan (2012–2017),
          approximately double the investment in infrastructure during Eleventh Five-Year Plan.
 ►        Incentives for investors
 ►        Government provides incentives such as 100% FDI for establishment of free trade warehousing zones (FTWZ), income tax (Section 80IA)
          exemptions for the users of FTWZ, 100% deduction of certain capital expenditure for cold-chain and warehousing facilities etc.



 Investment scenario
 ►        Between 2003 and 2010, the number of FDI projects in transportation and warehousing sector have increased by 7% annually.
 ►        The number of new FDI projects in the sector have more than trebled during 2003–08.


             FDI projects and jobs creation in Transportation and
                             warehousing sector                                     Sector/activity                             % of FDI cap   Route
     60                                                                   18,000    Courier services                            100%           Government
                                                                                    Storage and warehousing                     100%           Automatic
     40                                                                   12,000
                                                                                    Ports and harbours                          100%           Automatic
                                 55           51                                    Pipeline transport, ocean and water         100%           Automatic
     20                                46                                 6,000
                                                     37
                   28     26                                22                      transport, inland water transport
             14                                                     14
     0                                                                    0         Scheduled air transport service             49%            Automatic
                                                                                     Non-scheduled air transport                74%            Automatic up to 49%;
                                                                                    service/cargo airlines                                     Government route beyond
             Number of new FDI projects
                                                                                                                                               49% and up to 74%
          Number of jobs created
                                                                                   Source: Department of Industrial Policy and Promotion
     Source: FDI Database


Page 43                                                                  India as an Investment destination
Logistics
Opportunities

                                   ►   Goods and Service tax (GST), likely to be implemented in April 2012, will facilitate re-aligning/merging small
                                       warehouses into large centralized distribution centers.
 GST to boost warehousing sector   ►   With Government of India’s (GoI’s) focus on improving agri-logistics in India, the cold chain industry is also
                                       expected to reach INR400 billion by 2015, growing at a CAGR of 20%–25%.
                                   ►   This will offer significant investment opportunities for global established players with capital and experience
                                       in managing complex supply chains.


                                   ►   With rise in competition, domestic players will have to focus on cost reduction and advanced supply chain
                                       management solutions.
 3PL and 4PL: emerging formats     ►   Need for end-to-end logistics outsourcing will witness growth of third party (3PL) and fourth party logistics
                                       (4PL) market.
                                   ►   3PL market is expected to grow at a CAGR of 25%–30% between FY10–FY13.



 Encouragement to                  ►   GoI is encouraging private participation either directly or through public-private-partnership (PPP) model in
                                       various infrastructure development projects including container rail, ports, airports, dedicated rail freight
 private sector for
                                       corridors, multi-modal transport system, logistics parks etc.
 infrastructure                    ►   The contribution of the private sector in total infrastructure investment is expected to be 36% and 50%
 development                           during Eleventh and Twelfth Five-Year plan, respectively.



                                   ►   With growing Indian EXIM trade and focus on improving airport infrastructure, the air cargo industry is
                                       expected to witness growth at 8.5% per annum for the next five years.
                                   ►   Growing competition is increasing the need to reduce logistics costs. As a result there is a shift from manual
 Other emerging                        operations to electric equipment. This provides a boost to material handling equipment used by logistics
 opportunities                         industry such as forklifts, pallet trucks, order picker, overhead travelling cranes etc.
                                   ►   The need to provide better customer service and improve the efficiency of production, reverse logistics
                                       industry (repairing failed components to serve as spare parts, recovering unsold stock, improving old
                                       products, reusing/ redeveloping returned material) seems to be another upcoming segment.




Page 44                                                   India as an Investment destination
Power
Overview

  Sector fundamentals

   Generation mix (%, as of 31 December 2011)                                                                   Demand-supply gap                               ►   India has the fifth-largest generation
                                                                                                       (billion units, VI-XI Five Year Plans)                       portfolio worldwide (dominated by coal) and
          Total: 186,654.6 MW                                                                                                                ►    830.3
                                                                                                                                                                    a vast power transmission network of
                   2.6%
                                                                                                                    ►     559.4 620.9
                                                                                                                             ►                                      around 267,000 circuit kilometer (ckm).
                                                                                                        ►     447.3                          ►    746.5         ►   Energy generation grew at a CAGR of 5.2%
          10.8%                                        Thermal
                                                                                            ►      266.4                                                            between 2001—02 and 2010—11, reaching
                                                       Hydro                    ►     168.1                         ►     517.4 559.4
                                                                                                                             ►
                                                                                                                                                                    811.1 billion units in 2011.
       20.8%                                                                                            ►     395.9                                             ►   The country faces an average power
                                                       Renewable                    ►       ► 245.4
                                                                                           156.8                                                                    shortage of 10% and peak-hour shortage of
                           65.9%
                                                       Nuclear                        VI           VII   VIII            IX      X                XI*               around 12%, exerting significant pressure
                                                                                                      Demand               Availability                             on the PLF* of generation units.
                                Source: Central Electricity Authority (CEA)
                                                                                                                                                    * 2009-10       *PLF: Plant Load Factor

  Investment scenario

            FDI inflows, Power sector, India (INR billion)                                         11th Five Year Investment Plan                               ►    100% FDI permitted in all segments
                                                                                                        Power sector (INR billion)                              ►    No requirement of licenses to set up new
   2009-10                  61.4                                                                             ► 1,11
                                                                                         2007-08                                                                     power plants
                                                                                                                   1.3
                                                                                                                                                                ►    Duty free import of equipment permitted for
                                                                                         2008-09               ► 1,17
   2010-11                  57.9                                                                                                                                     Mega Power Projects (MPPs)
                                                                                                                      0.9
                                                                                                                                                                ►    Most project execution through
                                                                                         2009-10                    ► 1,25
                                                                                                                          9.6                                        international competitive bidding
   2011-12*                  65.8
                                                                                         2010-11                                ► 1,44                          ►    Heightened support by the government;
    April'00-                                                                                                                      9.7                               recently asked Coal India (CIL) to import
                                                                              321.2                                                                                  coal and sign a 20-year fuel supply
    Nov.'11                                                                             2011-12F                                         ►       1,59
                                                                                                                                                 4.7                 agreements with developers
                                                                                                                                                                ►    Estimated investment of US$600 billion in
* April-November                                                                                                                                                     the power sector by 2017
Source: Department of Industrial Policy and Promotion                                    Source: Planning Commission of India



Page 45                                                                                     India as an Investment destination
Power
Opportunities

                       ►   Increasing energy demand to spur investments in creating new power generation infrastructure
 Generation            ►   With coal expected to be the mainstay for generation, there are significant opportunities in thermal generation,
 capacity                  with a focus on supercritical technology.
 expansion across      ►   With a potential of 150 GW, hydro power is expected to witness high growth, with only 39 GW being exploited so
 fuel types to meet        far.
 future demand         ►   Lucrative destination for investment in nuclear power, largely encouraged by the waiver from the nuclear supplier
                           group (NSG) and the Indo-US nuclear deal.


 Transmission          ►   Opportunities exist to meet the need of connecting mega and ultra mega coal-based power projects in the coastal
 capacity ramp-up          regions and hydro projects in the north-east region to the deficit areas.
 to evacuate power     ►   With high T&D losses, significant investment opportunities prevail in creating high voltage transmission line
 from mega and             infrastructure, which is more efficient, reliable and has a higher transmission capacity.
 ultra mega            ►   Private participation is expected to grow as a result of the introduction of tariff-based competitive bidding; several
 projects                  projects backed by private investments coming up during the Twelfth Five Year Plan (2012—2017).


 Modernizing and       ►   India has high average aggregate commercial and technical (AT&C) losses of around 28% due to the obsolete
                           distribution infrastructure and inadequate monitoring systems in place. In addition, the country has an
 upgrading
                           electrification rate of around 66%, indicating significant opportunities for players to develop grass-root distribution
 distribution sector
                           infrastructure.
 and improve
                       ►   Open access across states for entities consuming more than 1MW of power has further made the distribution
 electrification           sector attractive. Moreover, the government is encouraging a distribution franchisee model, post the unbundling
 rates                     of state utilities.

                       ►   Heightened demand and significant investments across the power sector to spur demand for power equipment
                           and machinery.
 Equipment and
                       ►   BHEL, the leading equipment supplier, is planning to ramp up capacity to 20 GW by the end of 2012, to meet the
 machinery
                           100,000 MW target set in the Twelfth Five Year Plan
 shortage              ►   With BHEL facing issues such as long lead time and higher initial costs as compared to competitors, there are
                           significant opportunities that exist for private and foreign players to increase their penetration into the market.



Page 46                                             India as an Investment destination
Cleantech
Overview

    Sector fundamentals
                                                                                   Growth of renewable energy installed capacity in India
►    Renewable energy (RE) accounts for ~10-12% of a total of
     187 GW of power generation capacity installed in India.                                                                        (GW)
►    Favorable government policy for renewable energy sector are                                                             CAGR              20.0
     the key drives for growth.                                                                                               21%     16.9
►    Further, the existing wide gap between installed renewable                                                       14.4
     generation capacity and its estimated potential is positive                                         11.2
                                                                                              9.3
     attribute for the sector.
►    Off-grid renewable energy is seen as key solution to give
     access to reliable power to remote/rural areas.

                                                                                              FY07       FY08         FY09           FY10     FY11
                                                                     Source: MNRE
                                                                     Includes wind, solar, biomass (incl. bagasse), and small hydro. Excludes large hydro.
 Investment scenario

►    India has attracted US$1.3 billion foreign direct investment (FDI) in                                     Foreign direct investment in renewable
     the non-conventional energy sector, from April 2000 to November                                                                           energy
     2011.                                                                                    500
                                                                                                                                              $479.9
►    The Government of India (GOI) allowed 100% FDI in the renewable
     energy sector in December 2009.                                                          400
►    Foreign players are also allowed to set up renewable power
                                                                              (US$ million)
     generation projects on a build-own-operate (BOO) basis in the                            300
     country.
►    To expand the investor base and boost RE generation, the GOI                             200
     launched a generation-based incentives (GBI) scheme for grid-                                                                  $85.3
     interactive wind and solar energy projects.                                              100                   $43.2
►    Investors in the RE sector are also provided relief in customs duty,                             $2.1
     excise duty and sales tax.                                                                 0
                                                                                                     2006-07       2007-08          2008-09   2009-10

                                                                     Source: Financial Express



Page 47                                                   India as an Investment destination
Cleantech
Opportunities

                           ►   The National Action Plan on Climate Change (NAPCC) stipulates minimum renewable energy purchase
                               obligation (RPO) target of 5% of total grid purchase in 2010, increasing by 1% each year for 10 years.
 Enabling mandatory
                           ►   To enhance compliance with the RPOs, a tradable market based instrument in the form of renewable energy
 requirements                  certificates (RECs) has been launched. One certificate represents 1 MWh of electricity generated from
                               renewable sources.



 Jawaharlal Nehru          ►   The JNNSM targets to install 20 GW of solar energy capacity in India by 2022. The current installed capacity
 National Solar                is only 0.4 GW.
 Mission (JNNSM)           ►   The JNNSM aims to capitalize on the vast solar energy potential of India which has more than 300 sunny
 jumpstarting activity         days in an year with average solar radiation levels of 4 – 7 kWh/sq meter. This translates to a potential
 in solar sector               capacity of more than 100 GW.



                           ►   The GOI plans to establish a ‘National Mission for Hybrid and Electric Vehicles’ to promote sustainable
                               transportation system in the country.
                           ►   The GOI has exempted certain parts of hybrid vehicles from basic customs duty and countervailing duty
 Tax/excise breaks for
 electric vehicles (EVs)       (CVD). The excise duty on the development and manufacture of hybrid vehicle kits has been reduced from
                               10% to 5%.
                           ►   The GOI is also planning to launch, in the 12th five-year plan, an INR7.4 billion electric vehicle fund to
                               support research and development in the sector.



                           ►   The GOI launched the National Policy on Biofuels, with the objective of achieving energy security and
                               reducing vehicle emissions and to curb air pollution.
 Enabling policy for
                           ►   The policy targets 20% blending of biofuels, by 2020.
 biofuels                  ►   The policy promotes development of biofuels from non-food feedstocks, raised on land not suited for
                               agriculture, thus avoiding a fuel vs. food debate.




Page 48                                           India as an Investment destination
Technology
Overview

 Sector fundamentals

 ►   Aggregate revenue for Indian IT industry in FY2012 is estimated to be around US$100 billion out of which IT services and software
     (excluding hardware) contributed $88 billion. Export revenue (offshore ) for IT-BPO services is estimated to be US$69 billlion, 68.5% of total
     IT-BPO market. The IT-BPO industry currently accounts for approximately 25% of India’s total exports and 11% of total services revenue.
 ►   BFSI vertical is estimated to be the largest contributor to IT-BPO export revenue with its share at 41.2%, telecom share slipped to 19% in
     FY12 from the previous year. Emerging verticals such as retail, healthcare, media and utilities continue to record fast growth
 ►   IT-BPO service providers continue to focus on transformative services, new business models, verticalised solutions, services around
     disruptive technologies such as cloud, analytics while continuing their focus on operational efficiency and non-linearity to increase global
     competitiveness.




 Investment scenario

 ►   The Indian IT industry has been attracting considerable amount of FDI in the recent years. For the eight months between January to August
     of 2011 the total FDI investment in technology was US$3.6 billion, a growth of 75% over the prior year. Investments are being made in the
     four principal sectors of the Indian information technology industry — online businesses, IT services, IT-based services and software.
 ►   Software Technology Parks (STP) have been a major initiative in India to drive in FDI in the computer software industry. These STPs
     provide highly developed infrastructure and facilities that attract foreign investors. According to the ‘Special Economic Zone (SEZ) Rules,
     2006’, in case a SEZ is proposed to be set up exclusively for electronic hardware and software, including ITeS, there shall be a minimum
     built up processing area 1,00,000 square meters.
 ►   Indian IT organizations are investing to move away from a labor based model to developing technology platform that will offer increased
     revenue leverage and increase IP base of the industry.
 ►   India’s infrastructure development is expected to give a major thrust to growth of the industry. The Indian government is planning
     investments of around US$ 1 Trillion between 2013-2017 on infrastructure development.




Page 49                                                 India as an Investment destination
Technology
Opportunities

                         ►   Significant government investments in various e-governance initiative expected to drive domestic ICT
                             demand
 Government              ►   The central government has directed states to increase their IT budget to 3% of total budget from the current
 initiatives                 1.3% to 1.5%
                         ►   Government is one of the biggest consumers of IT-BPO services accounting for about 16.5% of total
                             domestic spending

                         ►   With increasing competition in the core services especially in voice-based services higher value services
                             broadly termed KPO (eg- analytics, legal process outsourcing) is one of the fastest growing areas in the
 High value add              Indian ITeS industry with an yearly growth rate of around 20%.
 services for BPO        ►   Many core BPO and integrated BPO vendors are slowly shifting their portfolio to KPO services to increase
                             margins.


                         ►   Tier II/III locations account for around 30% of all operational IT SEZs and account for around 8% of the IT-
 Growth of Tier-II/III       BPO industry revenue. The move towards these cities while help reduce cost also helps the IT vendor to
                             focus on SMBs – India presents a huge base of around 46 million SMBs that are rapidly increasing IT
 cities as alternative
                             adoption. Additionally it also gives access to large source of untapped labour pool.
 delivery location




 Increasing              ►   According the World Economic Forum report the competitiveness of India’s overall infrastructure as
 infrastructure              compared to key offshoring market is competitive. One major driver for the increasing competitiveness is the
 competitiveness             improved quality of infrastructure projects due to Public-Private partnership model throughout the country.




Page 50                                         India as an Investment destination
Financing infrastructure projects in India

   The infrastructure projects in India have traditionally been financed through budgetary allocations and grants by central or state
   governments.
   Over the past two decades, the Indian government has set-up specialized institutions to deal with infrastructure financing.

                                     Infrastructure Development Financial Corporation (IDFC)
   ► IDFC, a 40% state owned institution was incorporated in 1997 as a dedicated institution for financing infrastructure in India.
   ► IDFC operates on a commercial basis to finance viable projects in power, telecommunications, roads, ports, and urban services.
   ► It provides direct lending, purchase of loans, and co-financing; take-out financing, standby finance, and refinancing of longer maturities,
     partial credit guarantees and other forms of credit-enhancement for infrastructure projects, securitization of infrastructure loans and
     market making for these loans and mezzanine finance.

                                       India Infrastructure Finance Company Limited (IIFCL)
   ► IIFCL was incorporated in January 2006 under the Companies Act 1956 as a wholly Government owned Company.
   ► IIFCL is a dedicated institution purported to assume an apex role for financing and development of infrastructure projects in India.
   ► The company renders financial assistance through direct lending to eligible projects, refinance to banks and FIs for loans with tenor of
     five years or more, and by any other method approved by GOI.

          India Infrastructure Fund                  Infrastructure debt finance              Funds for infrastructure projects for 2010-12

   ► India Infrastructure Fund (IIF) is a          ► The GOI provided for setting up of       Source of fund            Estimated availability1
     SEBI-registered domestic venture                Infrastructure Debt Funds (IDF) in
     capital fund focused on long-term               the 2010-11 budget.                      Commercial Banks                    2,020
     equity investments in a diversified                                                      NBFCs                               1,007
                                                   ► Indian government is planning to
     portfolio of infrastructure projects.
                                                     launch a $10-billion infrastructure
   ► IIF has been sponsored by                                                                Insurance companies                  423
                                                     debt fund (IDF) in 2012 with
     Infrastructure IDFC, Citigroup Inc and
                                                     support of local and international       ECBs                                 505
     IIFCL as founder investors.
                                                     institutional investors.
   ► The Fund is managed by IDFC Project                                                      Debt Funds                          3,955
     Equity Company Limited, a subsidiary
     of IDFC.                                                                                 Equity                              1,847
                                                                                             Source: RBI                                 1. In INR billion



Page 51                                                India as an Investment destination
    Other sectors

              Automobiles                                      Banking                                   Insurance

Market landscape:                               Market landscape                           Market landscape
                                                ►   Public sector banks dominate with      ►   Total penetration of insurance
►    Indian automobile industry had a
                                                    deposit market share of more than          (premium as a percentage of GDP)
     turnover of US$73billion for the year
                                                    75%.                                       has increased from 1.90% in 1999-
     ending 31 March 2011.
                                                ►   But banking penetration remains low.       2000 to 6.72% in 2009-10.
►    The production of vehicles registered a
                                                    ►     Total loans as a % of GDP: 30%
     growth in excess of 25% during FY09–
                                                          (2010)                           Regulatory environment
     11.
                                                    ►     Population with access to bank
►    India acting as a sourcing base with
                                                          accounts: 40% (2010)             ►   Insurance Regulatory and
     more than 35 International Purchasing
     Office in India                                                                           Development Agency (IRDA) regulates
►    By 2020, the vehicle production is         Regulatory environment                         the insurance and reinsurance
     likely to treble from the levels in 2009                                                  business in India.
     and the size of the component sector       ►   Reserve Bank of India (RBI) reviews
     likely to grow from US$30–110billion.          and refines the regulatory and
                                                    supervisory policies for the sector.

Regulatory environment:
►    Foreign direct investment (FDI) up to
     100% is allowed under automatic
     route.




    Page 52                                          India as an Investment destination
Thank you
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