Performance in a challenging global economy India – a new world of opportunity

1. Performance in a challenging global economyIndia – a new world of opportunity

2. David CarthyChairmanIreland India Business Association(IIBA)September 2009

3. Welcome & Thank you • New IIBA Website – www.iiba.ie • 80+ members and growing • Irish Business Success in India • Other events • Join us – www.iiba.ie

4. HIGH GROWTH MARKETS Indian Opportunity Update SEPTEMBER 2009 KPMG

5. India in the current global context

6. Government’s Priority Agenda

7. Why India now? • Businesses in Ireland have been affected by recession that seems likely to continue • India offers itself as a solution on two counts: • Sourcing Hub • Indian and Regional Markets

8. Promising sectors on the Ireland-India bridge Food Technology Construction Infrastructure Telecoms & IT Clean Technology Education

9. Foraying into India Investors will have to bear some important things in mind … Market Dynamics Infrastructure Deficiency Difficulty in Enforcement Operating Environment Bureaucratic Tangles Regulatory Constraints Business Culture

10. Navigating in India

11. Way forward • Detailed study of Indian landscape particularly from standpoint of your business • Go with local partner unless there are other considerations • Structure investment holdings efficiently from a tax perspective • Organize business/management per ‘best practices’/specific needs of the case

12. Presenter Contacts Ian Gomes Chairman High Growth Markets Practice KPMG LLP +44 (0) 20 73114211 ian.gomes@kpmg.co.uk

13. Performance in a challenging global economy – India, A New World of Opportunity Speaker : Ananth Krishnan Head of Trade & Supply Chain 22nd September 2009

14. CONTENTS • Brief Introduction to India • Key trading indicators – India & Ireland • Overview of India’s banking Environment • Overview of HSBC

15. Brief Introduction to India

16. 6th Largest country in the world; World’s largest democracy Number of cell phone users by 2010 : 500 M Population : 1.12 Bn Number of Languages spoken : 18 official, 1600 dialects Number of movies released in 1 year : Around 1000 India – Some Key Metrics Demographics • GDP : $ 1.2 Trillion • Largest producer of milk, tea, sugarcane, cashew nuts • Second Largest producer of rice, fruit, wheat, sugar Economy • Number of banks : 88 • Number of bank branches : > 50000 • Number of ATMs : 17000 Banking

17. Key Trading Indicators – India & Ireland

18. India Trade in the past six years USD M Export CAGR 21% Import CAGR 28% Source: Ministry of Commerce website

19. India Top 5 Petroleum products Gems & Jewellery Chemicals & Related products Textiles & Textile related products Engineering goods Imports Exports Petroleum products Gems, Jewellery & precious metals Heavy Machinery Electronic Goods Chemicals & Fertilisers Top 5 Commodities China USA Saudi Arabia UAE Iran USA UAE China Singapore Hong Kong Top 5 Trading partners

20. Ireland Trade Statistics – A Snapshot Top 5 Commodities exported from Ireland • Organic Chemicals • Medical & Pharmaceutical products • Computers • Essential oils, perfume materials & toilet cleansing paper • Electrical Machinery and apparatus

21. Irish-India Trade – Few pointers India imports telecom, sound equipment, automatic data processing machines from Ireland. • Ireland-India Trade flows currently around € 500 M. • Grew by 13% in 2008 and expected to grow by 25% in 2009 • Ireland’s English Speaking population and access to EU markets can be leveraged • India’s upsurge as a global economy could present immense opportunities • Irish companies are keen to invest in the following sectors in India • Cement • Publishing • Medical Technology • IT Ireland imports products like yarn, garment and pharmaceuticals from India

22. Overview of India’s Banking Environment

23. Commercial Banking Landscape Foreign Banks Private Sector Banks State Owned Banks • The 30 Foreign Banks have branches in metropolitan cities and other big towns. • Major players include - • 27 State owned banks Pan-India coverage (including rural areas). • Major players • 31 Private sector banks. • The two major players ICICI Bank and HDFC Bank have branches in over 200 cities / towns • E-banking is gaining momentum in the big cities but rural areas still prefer branch banking • Banks and financial institutions are strictly regulated by the Reserve Bank of India • Detailed guidelines and notifications exist for investments and international trade

24. Overview of HSBC

25. About HSBC Our Strengths To leverage HSBC’s global platform to serve our Irish clients. Our Aim • Largest European Bank by market capitalisation • International bank of choice, with locations in 83 countries, 10,000 offices, and 125m customers • Unparalleled franchise in Middle-East and Far-East • HSBC London has the largest Treasury and Capital Markets business in Europe. • Access to banking services in 83 countries through one central internet banking platform, HSBCnet, centralising payments and cash management. • Access to local relationship teams in 83 countries and a dedicated relationship management team in Dublin to manage the relationship globally. Our Benefits

26. Manchester Stockholm Leeds Edinburgh Birmingham Isle of Man Moscow London Belfast Brussels Saskatoon Dublin Amsterdam Winnipeg Montréal Calgary Düsseldorf Warsaw Cardiff Prague St John’s Vancouver Ottawa Channel Islands Québec Portland Frankfurt Zurich Luxembourg Seattle Budapest Fredericton Sioux Falls Geneva Almaty Toronto Paris Lugano Tigard Boston Monaco Prospect Heights Sofia Chicago Barcelona Milan Izmir Glastonbury Beijing San Francisco Kansas City Buffalo Baku Istanbul Madrid Dalian Rome New York City Ankara Salinas Seoul Las Vegas Yerevan Valencia Chesapeake Bridgewater Athens Tianjin Adana Tokyo Lewisville Beverly Hills Philadelphia Tehran Nicosia Beirut Qingdao Chandigarh Virginia Beach Valletta Pusan Los Angeles Algiers Dallas New Castle Osaka Tel Aviv Manama Ramallah Wuhan Bermuda Houston San Diego Casablanca Washington Shanghai New Delhi Tripoli Amman Doha Chengdu Brandon Atlanta Shenzhen Tijuana Cairo Abu Dhabi Dammam Chongqing Torreón Miami Xiamen Jacksonville Monterrey Alexandria Ahmedabad Dubai Riyadh Dhaka Guangzhou Taipei Nassau Guadalajara Karachi Mérida Muttrah Hong Kong Cancún Kolkata Mexico City Macau Muscat Hanoi Jeddah Mumbai Puebla Visakhapatnam Ho Chi Minh City CaymanIslands Tortola (British Virgin Islands) Pune Salalah Hyderabad Acapulco Manila Bangalore Bangkok Colón Veracruz Chennai Cebu City Caracas Trivandrum Accra Kuala Lumpur Panama City Colombo Kota Kinabalu Medan Abidjan Labuan Bandar Seri Begawan Kampala Singapore Malé (Maldives) Kuching Belém Manaus Jakarta Semarang Fortaleza Bandung Luanda Recife Surabaya Salvador Brasília Ribeirão Preto Campo Grande Belo Horizonte Port Louis (Mauritius) Corrientes Rio de Janeiro Posadas Salta São Paulo Tucumán Curitiba Johannesburg Brisbane Resistencia Porto Alegre Perth San Juan Durban Santa Fé Cook Islands Paraná Adelaide Santiago Punta del Este Sydney Mendoza Cape Town Montevideo Auckland Córdoba Buenos Aires Neuquén Melbourne La Plata Wellington Bahía Blanca Mar del Plata Christchurch Pergamino HSBC Group Global Distribution – International network • 330,000 employees HSBC Group • 10,000 offices • 83 countries and territories

27. HSBC - Ireland Position Location HSBC has been operating in Ireland since 1979. We have over 500 people in our Dublin office, and in excess of 650 people on the island of Ireland. We have recently grown our corporate banking team in Dublin to serve our Irish clients. The Dublin team is staffed with corporate banking specialists with experience in both Irish and global banking. We have specialist teams dedicated to Trade, Treasury, and Payments/Cash Management. Location Position Corporate Banking Dublin Financing Transaction Banking Treasury & Risk Management • FX • Derivatives • Investments • Syndicated Finance • Structured Finance • Trade Finance • Global Payments & Cash Management • Supply Chain

28. HSBC Ireland - Our Successes Commitment to Balance Sheet growth in Ireland Expansion of our Irish based Team Access to our International Banking platform Access to Asian & US capital markets • A leading participant in Irish Corporate Debt Syndications • Global and International mandates for Irish based PLC’s • Providing counterparty strength on International Trade Corporate Banking • Safe haven for deposits. • Dublin Treasury desk active across all tradable currencies. Money Markets • Joint Lead arrangers for Bord Gais Bond • Prime Broker for Irish Government Debt • Banking Advisers to NAMA Capital Markets

29. HSBC in India In 1959 HSBC acquired the Mercantile Bank of India, which was established in Bombay in 1853. 47 branches across 26 commercial cities A full service bank Working capital finance Foreign exchange Treasury operations Cash management Investment banking Asset management Insurance Private equity and personal banking Well established long term relationships with top multinational and domestic corporate, public sector companies and financial institutions First bank to introduce ATM in India

30. Thank You Speaker : Ananth Krishnan Head of Trade & Supply Chain Ph: 353 1 635 6683 http://www.hsbc.ie

31. DOING BUSINESS IN INDIAFinancial Perspective Dalip Puri Head of Multicultural Commercial Banking UK HSBC Holdings Plc 1

32. Contents • Section 1 INDIA OVERVIEW • Section 2 INVESTING IN INDIA • Section 3 AVAILABILITY OF CREDIT • Section 4 HSBC IN INDIA Disclaimer: This presentation pertains to investment issues, financial markets and other related areas and is for information purpose only. Investors and interested parties should seek to get relevant business related information from a qualified professional. 2

33. Section 1INDIAOVERVIEW 3

34. India Overview – Snapshot • Population: 1.123 billion (Est. 2007) • Average literacy rate is 65% • Land area: 1.27 million square miles (1/3 of US) • Languages: 18 Languages (English widely used) • New Government: Strong Mandate & Reform Driven Agenda • Executive system : Constitutional head – President; real executive power vests in the Council of Ministers with the Prime Minister as its head. 4

35. India Overview – Economic Indicators 5 • Average GDP growth of 7.5% from 2001-2008. • GDP growth expected to slow down to 6.2% in 2009 •GDP growthis forecast to accelerate to 8.0% in 2010 • Per Capital Income increased 30% over the last 3 years.

36. India Overview – Financial Landscape 6

37. 7 Section 2INVESTING IN INDIA

38. • Foreign Equity Ownership Limits - Automatic Route – Insurance (26%) – Airlines (Domestic/ cargo)/ Telecom services/ Private sector banks (74%) – Pharmaceuticals, Non banking financial companies, Food processing (100%) • Foreign Equity Ownership Limits – With Permission (Foreign Investment Promotion Board) – News & current affairs (26%) – Broadcasting - Cable, DTH (49%) – Trading (100%) – Development of airports (100%) • Foreign Institutional Investors: Investment in primary and secondary markets – Registration with Securities and Exchange Board of India – Own upto10% of the paid-up capital of an Indian company – Foreign Institutional Investors can cumulatively hold up to 24% of paid-up capital of a company Investing in India 8

39. Investing in India – Business Presence 9 INDIAN INCORPORATED COMPANIES Joint Venture • Strategic alliances with Indian partners where sectoral caps do not allow foreign companies to set up business on its own • Advantages: – established distribution / marketing set up of the Indian partner – available financial resource & contacts of the Indian partners Wholly Owned Subsidiary • Is treated as a domestic company (limited liability) for tax purposes • Advantages: – provides flexibility of operations

40. Investing in India – Business Presence 10 FOREIGN CONCERN Liaison Offices, Representative Offices • No commercial or industrial activity may be undertaken Branch Offices • Manufacturing and Trading companies may open branch offices • Specific Reserve Bank of India approval required; registration with Registrar of Companies required, • Advantages: – Can acquire immovable property – Post-tax profits freely repatriable Project Offices • For those that have been awarded an Indian project • Treated as a branch office for tax purposes • No prior permission required from RBI

41. Investing in India – Taxation 11 • Corporate tax for companies incorporated in India: 33.9% • Foreign Companies operating in India: 41.2% • Tax on dividends: 15% • Withholding Tax - Royalties and Fees for Technical Services 15%-20% • Income tax holiday for new units exporting goods or services from a Special Economic Zone (SEZ) – 100% for the first 5 years and 50% for another 5 years • 10 year income tax holiday for infrastructure/housing projects • Currency transfer methods: SWIFT, Multiple Currency Accounts

42. Investing in India – A case study 12 Company profile: A real estate company, started in 2007 dedicated to promoting Indian property investment opportunities. • Business established • Growth opportunity identified in India • Conducted research on Indian real estate industry. • Sources used (economic data, government report and consultants) • Legal & accounting advice taken • Limited company setup in India (Pvt Ltd) • Indian employees hired • Business starts trading Business Evolves • 2007 • 2008 Best three business decisions made 1) Conduct detailed research and seek appropriate advice. 2) Treating Indian companies as partners rather than just suppliers. 3) Hiring talented Indian staff. Worst three business decisions made 1) Having a rigid itinerary. 2) Not fully understanding Indian hierarchical system. 3) Starting business before a global slowdown.

43. 13 Section 3AVAILABILITY OF CREDIT

44. Raising Debt Finance 14 Types of Debt Products • Working Capital • Overdrafts / On Demand Loans • Letters of Credit, Buyers Credit, Suppliers Credit • Receivable Financing, Factoring, Purchase order finance • Vanilla Long Term Loans • INR term loans for Capex • FCY term loans for Capex under RBI ECB norms (limited appetite) • Structured Finance (limited appetite) • Bridge Loans • Acquisition Financing • Highly Leveraged transactions

45. Debt Finance - Typical Credit Requirements 15 Working Capital Business plan of the company with projections for one year MPBF (Max. permissible bank finance) assessed in India by banks in line with company’s trade cycle Usually banks finance 75% of the working capital and the balance is promoter’s contribution Security - function of the company credit standing, however basic terms are: • First charge over current assets • First / Second charge over fixed assets • Personal guarantees (subject to negotiation)

46. Debt Finance - Typical Credit Requirements 16 Term Loans Business plan of the company with projections up to the tenor of the loan. Such loans are usually for a defined capital expenditure for which a separate project report is expected. Typical Debt / Equity – 2:1 Green field projects / non core diversifications are discouraged in this environment. Higher equity contributions expected. Hedging solutions are a important for FCY Loans Some basic terms for security are as follows: • First charge over fixed assets -1.3x asset cover at least • First / Second charge over current assets • Personal guarantees (subject to negotiation)

47. 17 Section 4HSBC IN INDIA

48. HSBC in India 18 The Leading International Bank in India • Presence in India since 1853 • Coverage with 47 branches • Presence in 26 cities • Arrangements with 10 Public & Private sector correspondence Banks. • Correspondence Bank Network reaches out to 3000 cities.