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Facts About India
Area: 3.3 million sq. kmPopulation: 1027 million (2001 Census)
1147 million (2008 July est.)Capital: New DelhiReligion:A secular country where manyreligions co-exist. Major religions practiced:Hindu: 80%Muslim: 14%Christian: 2.4%Sikh: 2%
Buddhist: 0.7%Jain: 0.5%Zoroastrian and others: 0.4%Location: Between latitudes 8 4' and 37 6'north and longitudes 68 7' and 97 25' east.Coastline length: 7,600 kmLanguages: 17 Major languages, 844 dialects.Hindi and English are most Popular
Climate: Three major seasons:winters, summers and MonsoonStates and Union Territories: 28 states and 7Union TerritoriesGovernment: Democratic form of GovernmentPrime Minister: Dr. Manmohan SinghPresident: Ms Pritibha PatilCurrency: Rupees
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States:1. Andhra Pradesh2. Arunachal Pradesh3. Assam
4. Bihar5. Chhattisgarh6. Goa7. Gujarat8. Haryana9. Himachal Pradesh10. Jammu and Kashmir11. Jharkhand
12. Karnataka13. Kerala14. Madhya Pradesh15. Maharashtra16. Manipur17. Meghalaya18. Mizoram19. Nagaland20. Orissa21. Punjab22. Rajasthan23. Sikkim24. Tamil Nadu25. Tripura26. Uttar Pradesh27. Uttarakhand28. West Bengal
Union Territories:A. Andaman and
Nicobar IslandsB. ChandigarhC. Dadra and
Nagar HaveliD. Daman and DiuE. LakshadweepF. National Capital
Territory ofDelhi
G. Puducherry
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BoundariesBoundaries
WestPakistan and
The ArabianSea
South
Palk Strait and the Gulf of Mannar (which separate itfrom Sri Lanka and the Indian Ocean
NorthAfghanistan, China, Nepal, and Bhutan
East
Bangladesh,Myanmar(formerlyknown asBurma), and
the Bay ofBengal
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The IndianThe Indian
MultinationalsMultinationals Globalization has given new meaning and
dimension to corporate India.
Many Indian firms have slowly, but surely,
embarked on the global path, leading to theemergence of Indian multinational companies.
Indian industry has crossed domestic frontiers
and established a credible presence in marketsabroad in a very short time.
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The evolution of the Indian multinational spansdiverse sectors, from pharmaceuticals toautomotive to hotels to textiles to engineeringgoods and entertainment.
With each passing day, Indian businesses areacquiring companies abroad, becoming world-
popular suppliers and are recruiting talentcutting across national boundaries.
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Headlines: Indian
Multinationals Going GlobalTata acquires Corus for $12bn
Hindalco acquires 100% stake in Novelis for $6 bn
Essar Global acquires Algoma Steel for $1.6 billion
UB Group acquires Whyte & Mackay for $ 1.17 Bn
Suzlon acquires REPower of Germany for $ 1 bn
Tata buys Jaguar and Land-Rover for $ 1 bn
Ranbaxy acquires Romanian Terapia for $ 324 Mn
And the list goes on .
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Cross-Border M&As
*Annual forecast for 2006 based on data for first 7 monthsSource: Accenture analysis of Thomson Financial data
Indian companies are going global
with a series of bold acquisitions
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India Globalization Scenario
Globalization wave GDP growth rate - 8% (check) (9.4% - 2006-2007)
Government Policies More and more liberalization
Liquidity and healthy capital markets
Increased confidence of Indian companies Competition from China (Specially in the Manufacturing sector)
Increasing focus toward outbound deals
Rise in deal value
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Why India goes global?
Attain the size factor expand assets
Gain access to new customers, new markets (widergeographic presence)
Acquire skill set enhancement
Obtain access to valuable natural resources
Help achieve lower costs and better price control
Merger & Acquires (M&A) essential for Indian Companies to go global - capturing Synergies
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Geographic Distribution of New Markets Captured(1995 to August 2006)
Asia
22
North America
2
Midd e eastouth America
2
urope
29
acific
5
Africa
6
Source: Accenture analysis of Thomson Financial data
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Why Indian Companies Look
Beyond Their Borders The need to capture new markets 1995 to August 2006 29% of Indian cross-border M&As occurred in the
European Union and 32 percent in North America Large consumer markets Transparent business processes
Rule of law Advanced technologies Skills Knowledge capital
Markets in these economies - mature and saturated
Difficult for Indian companies to gain market share without acquisitions
The need to expand capabilities and assets
The need to expand product or service portfolio
The pressures of domestic competition
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Industry Experience
GLOBALENVIRONMENT
INDIANENVIRONMENT
SEBI
Tex LawsCompaniesAct
RBI
FEMA
CompetitionAct
GAAP
Other Laws and Statutes
Industry Environment
Company
Environment
Strategy
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Execution Experience Commercials
Identification and Commercial Identifying Target
Indian valuations expensive
Increasing focus toward outbound deals
Transaction Support Valuation, DD, Documentation Identifying Team
Financing Funding Internal / External
Liquidity and healthy capital markets
Pay out Cash / Equity / Deferred Growing proportion of M&A deals that are settled in cash
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Execution Experience Regulatory
FEMA Rupee virtually convertible
Tax Limited resources for structuring / compliance foreign
transactions vis--vis Indian tax system Direct Tax Not major litigation Exceptions sections 80IA & 72
Indirect Tax State level legislations lag behind Stamp Duty and Sales Tax
Acquisition Structure - SPV Considerations
SEBI Hostile acquisitions not possible
Securitization based M&A not successful
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Execution Experience Other areas
Brand India
Beyond the Back Office
Cultural Issues
Contractual Permissions
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Average M&A deal sizes, India versusglobal
Source: Accenture analysis of Thomson Financial data
8
AverageM
&A
dealsize
U
D
illions
an une
India
lobal
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Breakdown of Indias Cross-Border M&AActivity by Industry Group
Breakdown of industry groupsCommunications & High TechnologyCommunications, Electronics and HighTech
Financial ServicesBanking, Capital Markets, Insurance
ProductsAutomotive, Consumer Goods andServices,Health and Life Sciences, IndustrialEquipment,Retail, Transportation
Professional ServicesConsulting, Financial analysis, IT Services,Outsourcing
ResourcesChemicals, Energy, Forest Products,Metals,Mining, Utilities*Annual forecast for 2006 based on 7 months of data from Thomson Financial
Source: Accenture analysis of Thomson Financial data
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Key Indian capital control policies
1999Foreign ExchangeManagement Act: Regulatingforeign exchange transactionsincluding foreign investment
Indian companies allowedUS$15 million in overseasinvestment
2002Competition Act: Law to ensure
free and fair competition inmarket
Annual limit of overseasinvestment raised to US$100million (up from US$50 million)
Indian companies in SpecialEconomic Zones can makeoverseas investment withoutthe restriction of US$100 million
2004Indian companies can invest
up to 100 percent of their networth even if the investmentexceeds the previous US$100million ceiling
Indian companies can investor acquire abroad in areasunrelated to their business athome. Can be overseas joint
ventures or wholly ownedsubsidiaries
2006 onwardsIncreased liberalisationexpected
2001Professional servicescompanies and registered
partnership firms allowed tomake overseas investments
Companies can make overseasinvestment up to US$50million under automatic route
2003Indian companies allowed toinvest up to 100 percent ofnet worth in a foreign entity
(up to US$100 million),through the automatic route
Indian companies maypurchase foreign exchange upto 100 percent of their networth as of the date of theirlast audited balance sheet
2005Special Economic Zones (SEZs)Act: Provides for establishment,
development and managementof SEZs to promote exports
Indian companies are allowedto fund foreign directinvestment using externalcommercial borrowing
Source: International Monetary Fund Annual Reports on Exchange Arrangements and Exchange Restrictions, 1996-2005
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Challenges in Going Global Survey
Key challenges Indian companies face while going global
Note: The percentage figures represent the percentage of respondents rating each item as 1 or 2on a scale of 1-5 (where 1=critical, 5=not critical)
Source: India Meets the World, Accenture, September 2006
Inade a e s ppo
f om sha eholde s
ac of f nding
ac of nowledge
of o he co n ies
eg la o y faco s
anagemen
mindse o p ocess
imma i y
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M&A Commandments
Muster resources for speedy execution
Devil is in the details
Focus on culture and communication
Be prepared for surprises
Be prepared to be evaluated
Plan on the acquisition structure
Tailor made Agreements
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Summary
In recent years most media references to India's growthhave focused on outsourcing and investment, but nowthe subcontinent is seen as a force that shapes globalmarkets.
Despite fears that India would be overrun by foreignmultinationals, Indian companies have not only managedto fight off competitors on their home ground, they alsohave taken the commercial battle abroad.
The increase in major cross-border transactions inrecent years has been facilitated by the relaxation ofregulations on overseas capital movements as well as asupportive political and economic environment.
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India Goes Global
Indian companies see "going global" as a strategic priority and Merger &Acquire (M&As) is increasingly seen as an attractive way to achieve this.
Ninety-five percent of Indian respondents highlighted the importance of goingglobal, with 62% seeing this as an overriding objective driving strategy.
The number of cross-border deals has increased steadily: from 30 in 1995 to 71in 2000, and is expected to be 183 in 2006.
About three-quarters of acquisitions conducted by Indian companies since 2003have been cross-border.
Acquisitions are spread across geographies, but are clearly focused ondeveloped markets. From 1995 to August 2006, 29% of Indian cross-border M&As occurred in the
European Union and 32% in North America. Less developed economies are attractive due to low acquisition costs and
favorable terms due to a high demand for foreign direct investment (FDI).
Acquisition targets have diversified to cover a wide range of industries. Pre-2000, key M&A target industries included consumer goods and services,
energy, pharmaceuticals and health care. Post-2000, industries as diverse as forest products, human resources and
market research have been targeted.
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India Goes Global The need to capture new markets: 81% of respondents said the keymotivation for going global was to find new markets to sustain top-line
growth.
The need to expand capabilities and assets: Many Indian companies areseeking to expand their distinctive capabilities by acquiring specific skills,knowledge and technology abroad, which are either unavailable or of
inadequate quality in India. The need to expand product or service portfolios: Most Indian
companies are endeavoring to increase market share by building the size oftheir product and service portfolios.
The pressure of domestic competition: Domestic competition is pushingsome Indian companies into less competitive overseas markets, therebyspreading their risk across geographies.
The next chapter: The increase in cross-border M&A will lead toconsolidation of key industries, intensification of competition in manyindustries as Indian companies apply their low-cost business models inWestern markets, and greater interdependence between economies asinvestment flows become more complex and multidirectional.
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Business India
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Liberalization
1947 1991 Ongoing
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1991: Narashimha Rao Government
A lot of reform strategies were introduced
Opening of the financial markets
Foreign investment was permitted
Flexibility in the ownership structure
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Strengths
Major strength in
Information technology
Auto components Chemicals
Apparels
Pharmaceuticals
Jewellery
Petrochemicals
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NaturalNatural ResourcesResources
Coal (fourth-largest) Iron ore (major producer) Manganese Mica
Bauxite Titanium ore Chromite Natural gas
Limestone Arable land (49%) Diamonds (Gold, silver, and diamonds) Petroleum (Maharashtra and Gujarat )
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Attracting International InterestAttracting International Interest
Top Investing Countries: Mauritius, the USA, UK, the Netherlands, Japan, Germany,
Singapore, France, south Korea, Switzerland
Top Sectors Attracting highest FDI inflows: Information technology, Electrical equipments, Services sector
(financial and non financial), Telecommunications,Transportation industry, Fuels, Chemicals, Constructionactivities, Drugs and pharmaceuticals, Food processing, Cementand gypsum products.
Exports:
US$ 34,303.50 million (April 2006-June 2007) Imports:
US$ 54,908.83 million (April 2006-June 2007)
Source: http://www.indiainbusiness.nic.in/know-india/know-india.htm
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India: Technology
Superpower Geneva based STMicroelectronics one of the largestsemi conductor companies to develop integrated circuitsand software in India
80 of the worlds 117 SEI CMM Level-5 companies arebased in India
Some of the worlds major automobile makers areobtaining components from Indian companies
New emerging industries include Bio Informatics, BioTechnology, Genomics, Clinical research and Trials (eg.
Biocon, Panacea Biotech, Wipro Health Sciences)
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Auto Manufacturing
India is also making great strides in manufacturing industryReliance Industries, India's largest private corporation, has build thelargest oil refinery site in the world on the country's western coast near
Jamnagar in Gujarat State
Hero Honda with 1.7M motorcycles a year is now the largestmotorcycle manufacturer in the world
India is the 2nd largest tractor manufacturer in the world
The 5th largest commercial vehicle manufacturer in the world
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India: Trade
India is one of the worlds largest diamond cutting andpolishing centres, exports were worth $6 billion in 1999
Wal-Mart sources $1 Billion worth of goods from India half its apparel and plans to increase
Gap sources about $600 million and Hilfiger $100 million
worth of apparel from India
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Infrastructure & Other
Benefits Sea 7,600 km of strategic coastline Air International airports
Roadways Railways
SEZ Zones:
Independent and functional regulator for theelectricity sector
Tax holidays
Business Language - English
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CULTUREIS THE ART OFCULTUREIS THE ART OF
LIVINGLIVING Our cultures define our fundamental beliefs
about how the world works
Forms ways in which we interact and
communicate with others Develop and maintain relationships.
Doing business in a particular nation requires afocus on a multi-dimensional understanding of itsculture and business practices.
Understanding those differences and adapting tothem is the key.
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Indian Institute ofTechnologys
(Engineering) Indian Institute of
Management (premierbusiness school)
All India Institute ofMedical Sciences(Medicine)
Illiteracy - literacy rate of the country is around 57%.
Rural India is dominated by illiteracy
The IITs were ranked3rd best worldwide fortechnology, after MITand University ofCalifornia, Berkeley.
Medical colleges andinstitution survey(MCIS) conducted byWHO, AIIMS ranked1st in Asia
The aim is todevelop a skilledworkforceThese form the elite club of the
best centers for highereducation in India and arecomparable to the best in the
world
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BollywoodBollywood
The Indian film industry is the world's largestproducer of feature films
Mumbai-based "Bollywood," producescommercial Hindi films as its most recognisableface.
Other strong cinema industries are based on theTamil, Telugu, Kannada, Malayalam, Bengali,and Marathi languages.
One of India's well-known filmmakers wasSatyajit Ray, who received many internationalawards during his life, including an Oscar in1992 for Lifetime Achievement.
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Bollywood films are generallymusicals, and they have catchymusic in the form of song-and-
dance numbers woven into thescript.
A movie is normally three-hour-long extravaganza with an
intermission after one and a halfhour.
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ApproachApproach
Direct approach (eg. through net yellowpages)
Appointing a representative in thecountry
Trade shows, exhibition, fairs
Indian Embassy in Canada
Chamber of Commerce Strategic Alliance
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AttractivenessAttractiveness
High potential market
Large population offers both - Blue and White collarworkers
Good Customer base Growing economy
English The Business Language
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Further Recommendations
Flexible organization structures are essential: Successful integration requires aflexible and fluid approach by management to ensure the ability to adapt to cultural,social and other factors that vary across markets. Eighty-three percent of Indianbusiness leaders identified the development of flexible organizational structures asthe most critical capability for the success of globalization strategies.
Due diligence must be comprehensive: The due diligence needs to cover unknownmarket landscapes as well as additional factors like governance and legislative andregulatory rules and processes. Seventy-seven percent of respondents identified"complying with regulations in overseas markets" as a critical capability forglobalization.
Location decisions need a strategic approach:A wide range of country-specific
factors must be incorporated into decision-making process. "Coping with country risksin overseas markets" was selected as a critical capability for success by 76 percent ofrespondents.
Strong communication is fundamental to success:A successful integrationprocess relies on effective, consistent and regular communication from companyleaders to all constituencies, including customers, employers, regulators, suppliers,shareholders, competitors and partners.
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THANK YOUuu
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