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India: Fastest Growing Free Market Democracy
India: Among the Top-15 Countries in terms of GDP at constant prices
India’s GDP witnessed high growth and was the second fastest growing GDP after China
The Indian economy has witnessed an unprecedented growth…. Booming Indian services and industry sector are providing the required impetus to the economic growth
8.4% 8.5% 7.5% 9.4%
Fastest GDP growth of 9.4 percent in 2006-07, since last 18 years
Indian economy is the 4th largest in terms of PPP – USD 4.1 trillion in 2006
The sound performance of each industry segment is leading to the overall robust performance of the Indian economy
Contribution of Services increased from 49 percent to 55 percent
Growth in sectors (2006-07): Industry: 10.9% Services: 11% Agriculture: 2.7%
India: Robust Economic Platform
India’s enhanced economic performance has been the major contributor towards increased Forex reserves
…at present level of Forex reserves, the country has adequate cover for 12 months of imports
Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability India’s Forex reserves are in excess of external debt…
Forex reserves witnessed an increase of 200 percent for the period 1990-2007
Falling Dollar inflates the India’s external debt
Increased confidence of investors in Indian companies have led to a surge in cross border borrowing by the corporate houses
…the decreasing external debt to GDP ratio indicates that India has a sound economic platform
India: Surging Exports
Services sector has been a major contributor to increased exports from India
Acceptance of Indian products along with the cost advantage has provided an edge to Indian companies
Quality and cost advantage are the two important parameters leveraged by the Indian producers to increasingly market their products and services
Indian companies have chalked out extensive plans to increase their presence abroad
Imports of products by India mainly includes petroleum products and minerals
Petroleum products are the major contributors towards India’s growing imports
India: Attractive Investment Destination
India is ranked second in AT Kearney FDI confidence index
With improved performance on PE ratio and ROE, Indian markets have attracted large investments
Telecom and Electronics topped the list of inward FDI
180 percent Increase
Return on the Investments in India (2006 Q1)
Market India PE Ratio 16.1 10.62 10.26 9.85 13.21 12.17 9.84 11.19 9.35 10.9 P/B Ratio 4.53 2.06 3.09 1.84 1.82 2 2.32 2.12 2.46 2.39 22 17 NA 16 16 11 23 15 18 15 RoE (%)
FDI inflow for the period 2006-07 witnessed a growth of 180 percent over the same period last year
China Indonesia Korea Malaysia Taiwan Thailand EM Asia
Mauritius has been the largest contributor towards FDI into India…..
Latin America EM Europe
India: Vibrant Capital Market
Sensex – The Bombay stock exchange index has risen 15 times from 1990s to reach 15,000 mark in July 2007
India is among the major destinations across the globe for inflow of US Dollar i.e. FIIs
7/9/2007 Crossed 15,000 mark
1/12/2007 Crossed 14,000 mark
Sensex risen 15 times in the period 1990-2007
FIIs augmented support by infusing large investments in Indian stock market
2/7/2006 Crossed 10,000 mark
Emergence of industry and confidence of local investors along with the FIIs has led to increased movement of sensex
12/30/1999 Crossed 5,000 mark
Exorbitant industry performance
Increased local investors’ confidence
India: Vibrant Economy Driving M&A Activities
Growth Drivers: Globalisation of competition Concentration of companies to achieve economies of scale Lower interest rates and vibrant global markets Cash Reserves with Corporates Trends: Ratio of the Size of acquisition to the size of acquirer has grown from 10 percent in 2004 to 25 percent in 2006. Cross-border deals are growing faster than domestic deals Private Equity (PE) houses have funded projects as well as made a few acquisitions in India SECTOR
Automotive Banking and Financial Chemicals and Plastics Electrical and Electronics Energy FMCG, Food and Beverages IT and ITES
518 1,375 1,133 896 1,484 1,327
Manufacturing Media Oil & Gas Pharma & biotech Telecom Others
933 630 384 2,520 2,198 4,006
In 2006, there were a total of 480 M&A deals and 302 private equity deals… … Average deal size close to USD 36 million… …Contribution of private equity deals to total number of deals have increased from nearly 9 percent in 2004 to 28 percent in 2006
Major M&A Deals Undertaken Abroad by India Inc.
Tata Steel buys Corus Plc
USD 12.1 billion
Hindalco acquired Novelis Inc.
USD 6 billion
Essar Steel acquired Algoma Steel
USD 1.58 billion
Suzlon Energy Ltd. acquires REpower
USD 1.6 billion
Videocon Industries acquired Daewoo Electronics Corporation Limited
USD 730 million
Major M&A and Investments Announcements in India
Vodafone buys Hutch
USD 11 billion
Plans to spend on its development operations in India over the next four years
USD 1.7 billion
Plans investment in private equity, real estate, and private wealth management
USD 1 billion
Aditya Birla Group increased its stake in Idea Cellular by acquiring 48.14-percent stake
USD 0.98 billion
Renault, Nissan and Mahindra & Mahindra has initiated a Greenfield automobile plant project in Chennai.
USD 0.905 billion
Mylan Laboratories acquired a majority stake in Matrix Laboratories
USD 0.74 billion
India: Pacing Ahead to Emerge as a Major Economy in the World
2007 Global Retail Development Index (GRDI)
India has been ranked superior to other major countries by many prominent surveys…
AT Kearney placed India among the top three in its FDI confidence index…
… the retail market along with the services sector has been attracting the interest of major players
India is expected to outperform its rivals in the BRIC, in terms of GDP growth rates, from 2015 onwards…
India: Astounding Demographics
Growth in the higher income categories of India’s population has created an affluent section of society, which has significant level of purchasing power
DEMOGRAPHIC TRANSFORMATION OF INDIA
Annual Household Income (in USD) 2 9 17 74 285 710
20 33 120 404 613
Rich (Above 115,000)
High Income (57,000 – 115,000) Consuming class (23,000 – 57,000) Working class (10,200 – 23,000)
9 48 221 726
Needy (Below 10,200)
* In PPP terms
Increasing per capita income and large population moving into middle class has led to high level of consumerism in India
Increasing per capita income coupled with an emerging middle class has provided the necessary impetus to consumerism in India
India: Increasing Working Population
Growth in Global Working Age Population (15-64)
Stock Position 2005 World India Africa China South East Asia Latin America Southern Asia USA Europe Japan 4,168 691 500 934 362 359 132 200 497 85
Addition to Working Age Population by 2010
Countries worldwide are anticipating a shortage of working population in the future. India is expected to emerge as a clear winner, and by 2050, it will have the largest working age population.
Growth Expected in India
To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 trillion in the next five years
GDP – USD 900 billion GDP growth rate – 9%
GDP – USD 750 billion GDP growth rate – 9.5%
Services contribution – 60-65 % FDI limit is expected to be 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade – Should be positive with increased level of exports as compared with imports Investment goal – USD 370 billion
GDP – USD 590 billion GDP growth rate – 9 % Services contribution – 54 % FDI limit not 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade – USD (-)46.2 billion Investment goal – USD 250 billion
Services contribution – 60 % FDI limit is expected to be close to 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade – Should increase with surging exports as compared with imports Investment goal – USD 305 billion
Why India? – Quote Unquote
India is among the three most attractive FDI destinations in the world. “India has evolved into one of the world's leading technology centers“.
Craig Barrett Intel Corporation A T Kearney FDI Confidence Index 2005
India has among the highest returns on foreign investment.
By 2032, India will be among the three largest economies in the world.
US Department of Commerce
BRIC Report, Goldman Sachs
“We came to India for the costs, stayed for the quality and are now investing for innovation”.
“The Indian market has two core advantages - an increasing presence of multinationals and an upswing in the IT exports”.
Travyn Rhall, ACNielsen
“India is a developed country as far as intellectual capital is concerned”.
- Dan Scheinman, Cisco System Inc. as told to Business Week, August 2005 Jack Welch General Electric
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