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India Jaideep S Kalra 8 Sept 2011

India Jaideep S Kalra 8 Sept 2011. We do seem to know this……. Strong GDP growth amid recession Back office of the developed world Land of Nano - $2k passenger car and Indian Premier League (IPL) Bureaucracy & corruption scandals

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India Jaideep S Kalra 8 Sept 2011

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  1. India Jaideep S Kalra 8 Sept 2011

  2. We do seem to know this…… • Strong GDP growth amid recession • Back office of the developed world • Land of Nano - $2k passenger car and Indian Premier League (IPL) • Bureaucracy & corruption scandals • Most expensive residence in the world (Ambani’s - $2 bn) & Asia’s largest slum in vicinity • 1.2 Bn people, 26 states and over 100 languages • Anna Hazare peaceful protests – the modern day Gandhi OR A unique set of Opportunities and Challenges for any Business

  3. Macro-economic marvel or one time wonder Economics • GDP: $1.5 tn (UK is 1.5x India GDP) 10th globally & 4th on a PPP basis • Per capita: $1.3k (UK 28x & China 3.4x) • Inflation: 8.5 pct • Public debt 72 pct of GDP (UK 76 pct, US 93 pct & Greece 143 pct) • Budget deficit of 5.1 pct of GDP (UK 10 pct, US 10 pct & Greece 10.5 pct) • Bank base rate 7 pct (UK 0.5 pct) Demographics • Labour force of 470 mio and growing middle class at 250 mio • Young population – unlike China Differentiating factors could to be effectiveness of fiscal and monetary policy to manage growth momentum. Growing middle class and young population driving demand. Inflation a concern and a priority for the Government but recent comments on the potential impact of crisis in Europe and US indicate steps could taken to ensure 7.5 pct to 8 pct is maintained.

  4. Moody’s release 6Sept11 “India's medium- to long-term economic potential continues to be buoyed by its demographic profile, robust savings and investment rates and rising international competitiveness of its corporations”

  5. Growth POTENTIAL • Consumer demandpotential: Telecom sector - 2nd largest globally. • Fastest growing Automobile & Biotechsector. Indian Pharmaceuticals Industry ranks 3rd in terms of volume. • Private healthcareboom – Medical tourism to Basic healthcare. • $1 Tn investment in Infrastructure(2012-17) of which 25 pct in roads, rail and port projects. • $13 Bnof farm produce is wasted due to Insufficient cold chain infrastructure. Opening up of FDI in Multi Brand Retail on the cards • Over 50 pct of the Indian education sectoris Private and British education is highly regarded. • Preferred destination for High tech IT and R&D • Englishis the most widely spoken business language

  6. Opportunities & Challenges • Vast geographicalspread. Need to understand the major commercial centres and Tier 2/3 cities for your business. • Entrepreneurial Mid Market enterprises for JVs with access to Capital. Need to do background checks and understand Long term interest of the partner. • British brands and institutions held in high esteem. Need to leverage the product and design expertise • Strong management talent with prior work experience in MNCs. Need to manage attrition and nurture talent.

  7. Opportunities & Challenges • Culture & Climate are incredibly different. Need to be prepared and this can make or break an opportunity. • Corruption and lengthy litigation an issue. Need to have realistic expectation in terms of time to market and enhanced due diligence to avoid litigation. • Complicated tax laws and lack of asset backed financing. Opportunity to leverage DTA treaties with MAR/ SGH and optimum capital structure. • Financial risk due to high Interest rates & Volatility in exchange rates. Best to explore Offshore Debt financing (External Commercial Borrowing) and natural hedge on exports/imports.

  8. Recent best practices • First sales invoice before incorporation • Product life cycle analysis. e.g Safety clothing & footwear • Cost structure and innovation are key. Benefit from lower cost of capital in UK and labour cost in India and not vice versa. • Leverage local talent • Need to have India in your long term plans. Opportunity could present itself as in “God We Trust”

  9. Thank YouJaideep Karla - jaideepkalra@hsbc.com

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