Doing business in India
Contents
Section 1 India – An Overview
Section 2 Trade
Section 3 Doing Business In India
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
directly from the concerned government body
2
Section 1 India – An Overview
3
About India – Snapshot
• Population: 1.17 billion (Est. 2009)
• Average literacy rate is 65%
• Land area: 1.27 million square miles (1/3 of US)
• Languages: 18 Languages (English widely used)
1800
India GDP (USD Bn)
1638
1600
1381
1400
1115
1200
1000
800
785
1175
1175
2008
2009
877
600
400
200
0
2005
2006
Source: HSBC Research
4
2007
2010e
2011e
Did you know –
India is the world’s
largest democracy
Investment Climate
Did you know –
India is 1 of only 3
counntries to make its
own supercomputers
Favourable demographics (Rise of the “Great Indian Middle Class”)
• More than 35% of the Indian population is between 15 – 35 (Working population to rise to 70% by 2030)
• 2nd fastest growing HNWI market (20.5%) with over 100k HNWIs (Merrill Lynch Report)
Access to labour and skills (Cost Advantage)
• Over 380 universities, 11,200 colleges and 1,500 research institutions
• World’s largest pool of English speaking scientists & engineers
• Labour cost (US$ p.a.) @ 2200, as against 3600 China, 6600 Brazil, 8500 Poland
• Less than US$ 7,500 p.a. for a call center agent in India (US$ 19,000 in US, US$ 17,000 in Australia)
Financing (Credit Growth 30%+)
• Credit ratings of SMEs introduced
• Firms’ new investments financed by commercial bank credit: 27.7% (India) v.s 14.7% (globally)*
Infrastructure
• Largest road network in the world (3.85Mn kms)
• 12 major & 187 minor ports over 7,500 kms of coastline
• 5th largest installed power capacity of 123GW • Privatization of airports, ports, road projects
5
* World Bank survey
Section 2 Trade
6
India in the global context
•G
DP to touch USD 1,600 Bn by 2011 from USD 785Bn in 2005
(over 100% growth in 6 years)
• GDP growth rate in the 7% - 10% range over the last 5 years
• Growing trade relations and wider diversification across countries
– Share of US in total trade down from 14.1% in 1991 to 11.4% in 2008-09
– Share of China up from 0.9% in 1991 to 5% in 2008-09
– ASEAN, WANA and South Asian economies account for 37% of Indian
exports and 39% of imports
• Foreign trade growing at a rate more than twice the growth rate of GDP
7
Did you know –
India is the world’s
12th largest, 2nd fastest
growing economy
Trade flows – India
Rank
Imports (Top 10)
%Growth
%Share
Rank
Exports (Top 10)
%Growth
%Share
1
China
19.7
10.7
1
UAE
56.5
13.2
2
UAE
76.5
7.8
2
USA
2.0
11.4
3
Saudi Arabia
2.6
6.6
3
China
(13.9)
5.0
4
USA
(11.9)
6.1
4
Singapore
14.4
4.6
5
Iran
13.1
4.1
5
Hongkong
5.4
3.6
6
Germany
21.5
3.9
6
UK
(0.8)
3.6
7
Switzerland
21.6
3.9
7
Germany
24.7
3.4
8
Australia
42
3.6
8
Netherlands
20.9
3.4
9
Kuwait
24.5
3.2
9
Saudi Arabia
37.7
2.8
14
Singapore
(5.7)
2.5
10
Belgium
6.5
2.4
Source: Ministry of Commerce, Govt. of India (2008-09)
4.6% share in exports and 2.5% share in imports
Amongst top 5 export destinations for India
8
Trade flows and FDI – India/Singapore
9
8
Exports from India (USD Bn)
5.30%
4.80%
% Share
4.60%
4.50%
7
6
5
5.43
6.05
7.38
8.44
2
1
0
9
2006
6
2007
2008
Imports into India (USD Bn)
% Share
3.2%
3.0%
8
7
Major items of trade
5%
Exports from India:
Imports into India:
4%
• Mineral oils & fuels
• Products of mineral oils
• Jewellery, precious stones
• Electrical equipment
1%
• Electrical machinery
• Organic chemicals
0%
• Aluminium and products
• Optical/Medical instruments
3%
4
3
6%
2009
2%
3.5%
2.5%
3%
2.5%
2.3%
5
2%
4
1.5%
3
2
1
0
1%
3.35
5.48
8.12
7.65
2006
2007
2008
2009
Source: Ministry of Commerce, Govt. of India
9
0.5%
0%
FDI from Singapore to India:
• Exports from India:
• FDI from Singapore to India:
• Cumulative FDI : USD 9.5Bn (9% share)
• Highest inflows from any country apart from Mauritius
Section 3
10
Doing Business in India
What can you do in India?
Tap the
consumer base
Tap the
trade opportunity
Tap the
talent pool
11
Tap the
cost advantage
Access India
Tap industry
expertise
Tap the financial
opportunity
Did you know –
In area terms, India
is 70% the size
of Europe
How can you access India
Did you know –
India is 1 of only 3
countries to make its
own supercomputers
Foreign Direct Investment: Automatic Route - Equity limits
– Insurance (26%)
– Airlines (Domestic/cargo)/ Telecom services/Private sector banks (74%)
– Pharmaceuticals, Non banking financial companies, Food processing (100%)
Foreign Direct Investment: With Prior Permission (Foreign Investment Promotion Board)
– News & current affairs (26%)
– Broadcasting - Cable, DTH (49%)
– Trading (100%)
– Development of airports (100%)
Foreign Portfolio Investment: Investment in primary and secondary markets
– Registration with Securities and Exchange Board of India
– Own up to 10% 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
12
How can you access India
Indian Company
Joint Venture
• Strategic alliances with Indian partners where sectoral caps exist
Advantages:
– Established distribution / marketing set up of the Indian partner
– Available financial resource & contacts of the Indian partners
Wholly Owned Subsidiary
• Treated as a domestic company (limited liability) for tax purposes
Advantages:
– Provides flexibility of operations
13
Did you know –
100 of Fortune 500
have R&D facilities
in India
How can you access India
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 Central Bank approval required
• Indian transfer pricing applies
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
14
Did you know –
India has the world’s
second largest pharma
industry after China
Key success factors for doing
business in India
• Understanding the diversity of the Indian market
• Picking the right locations
– Infrastructure
– Skill
– Customers
• Constant innovation: Investment in R&D
• Patience: Harvest the opportunities
15
Accessing India – A case study
Key objective
Business model
Legal framework
16
Sustainability
Access India:
Plotting the
roadmap
Infrastructure
Financial
investment
Did you know –
India is the world’s
second largest
small car market
Accessing India – A case study
Key Objective
Sustainability
Business Model
Infrastructure
Legal framework - Starting business
Financial Investment
17
– Source quality raw materials at a low cost
– Manufacture at a low cost for existing customers
– Export goods to tap consumer base in India
– Manufacture in India & tap the Indian consumer base
– JV with Indian company
– Setup Indian company
– Part outsourced
– Franchise model
– Registrar of Companies (ROC)
– MoA & Certificate of incorporation
– PAN & Tax Account number
– Mumbai Shops & Establishment Act registration
– Registration for VAT, Profession tax, Employee PF
– ESIC (medical insurance) registration
30 days (Mumbai)
– Capacity expansion: Rapid growth
– Tackling diversity: Local markets
– Improving cost efficiency: High volume - Low value
– Investment in R&D: Local innovation
– Location: Government policy
– Property: Lease v/s buying
– Supply chain & logistics: Trusted partnership
– Resourcing: Skill matching
– Distribution & Marketing: Market knowledge
If government approval required
– Approval by Foreign Investment Promotion Board (FIPB)
– Post which below procedure applies
If automatic approval
– Notify RBI within 30 days of receipt of inward remittances
– File documents within 30 days of issue of shares
Did you know –
India is one of six
countries that launches
it’s own satellites
Some attractive sectors
Market sectors with the most upside potential in India in the next three years
Basic Materials
3%
Other
5%
Media & Publishing
6%
Transportation
Oil & gas, energy, utilities
Travel, hotel & tourism
Automotive
10%
10%
12%
14%
Health care, biotech & pharmaceuticals
Agriculture, food processing
Capital goods & industrials
Consumer goods & services & retailing
Real Estate
Construction
Communications, technology & telecoms
Banking, finance & insurance
Source: Investment Climate in BRIC Nov06: Survey of CFA institute members
18
16%
18%
22%
29%
32%
38%
41%
57%
Section 4
19
HSBC in India
HSBC in India
The Leading International Bank in India
• Coverage with 50 branches
• Presence in 29 cities
• Plan for over 30 new branches*
Chandigarh
Noida
Ludhiana
New Delhi
Gurgaon
Jaipur
Surat
Patna
Ahmedabad
Vadodara
Guwahati
Raipur
Indore
Nashik
Nagpur
Mumba i
Pune
Hyderabad
Visakhapatnam
Bangalore
Mysore
Trivandrum
Kochi
20
*Subject to approvals
Chennai
Coimbatore
Kolkata
A full servicing offering
Trade Services
Transaction Banking
Export/Import Financing
Payments & Cash Management
Documentary Credit
Global e-banking package - HSBCnet
Structured Trade Finance
Host to Host solution - HSBC Connect
Instant@dvice
End-to-end supply-delivery chain solutions
Documentary Collection
Coverage of 4000 locations - Over 500 top
tier clients
9.6% & 9.3% of India’s exports
and imports throughput
Business Finance
Flexible MIS/Automated Reconciliation
Services
Financing of fixed assets and
working capital
Treasury and Capital Market
Local and foreign currency loans
Interest rate products
Channel financing
Customised/ structured solutions
Bill Discounting
Domestic and export factoring
21
Foreign Exchange products
Our Approach
We understand that no two businesses are the same
We understand that each one of you have your unique operating environment
We follow the ‘Solutions’ Approach after thoroughly understanding your business
We strive to provide a unique solution of a bundle of products and services on the
basis of the life stage of your business
22
Did you know –
India is the largest
producer of milk,
2nd largest of food
Providing the right solution at each
stage of the business
Banking Requirements
Initial Stage
Growth Stage
Consolidation
– Relationship Manager
– Transaction Banking
– Forex management / Treasury
– Lending lines for Trade /
Working capital
– Current Accounts
– Internet Banking
– Access to over 23,000 VISA ATMs
– Escrow Services
– Trade Services
– IPO Services
– Cash Management
– Term Loans
– Factoring Solutions
– Unsecured Business overdraft
– Commodities Financing
– Growth funding (PE / Capital Mkts)
– Loans against Property
– Multi currency accounts
– Outsourcing (Payroll / Payments)
– Seamless cross border banking
– Growth funding
(PE / capital markets)
– Aquisition Funding /
Investment Banking
– Risk management
Time Scale
Start up
23
Stable Business
Rapid Growth
Niche Market Position
Market Leader (Global / Local)
A success story
HSBC Facilities
– Checking accounts
– Working Capital
– Term loan
– FX limits
– Fex limits
– PCM and Trade
– Facilities - $7m
– HSBCnet
Corporate Evolves
An international IT consulting company, started in 1999, delivering affordable business and technology
solutions. HSBC’s total exposure stands at $100M, growing from $7M four years ago
– Aggressive growth
24
– Corporate cards (2k)
– Cross border
(SGH, UAE, GER, UK)
– Derivatives
– Collecting bankers
– Aquisition funding
– Dividend payment
– Capex funding ($18m)
– Cross border
(Netherlands, AUS, Dubai)
– Total Facilities - $60m+
– 2 new centers
– Acquisition of $10M
– Goes Public $ 54M
– Acquisition of $6.5M
– 2 new facilities
2003-04
$20m
2004-05
$55m
2005-06
$102m
2006-07
$130m
2007-08
$180m
Key achievements
Best Global Supply Chain Finance Provider 2008
Best Pre-Shipment Financing Solution 2008
Best Internet Trade Finance Bank in Central and Eastern Europe 2008
Best Supply Chain Finance Provider in the Middle East 2008
Best Trade Finance Provider in the UK 2006 - 2009
Best Trade Finance Provider in HK 2002 - 2009
Best Trade Finance Provider in Saudi Arabia 2009 (SABB)
Best Overall Bank for Cash Management in Asia 2008
Best Overall Bank for Cash Management in Middle East 2008
Best Bank for Payments & Collections in Asia 2008
Best Bank for Payments & Collections in Middle East 2008
Best Global Trade Finance Bank 2008
Best Islamic Trade Finance Bank 2008
Best Trade Finance Bank in the Middle East and North Africa 2008
Leading Trade Services Bank in Asia-Pacific 2008
Leading Trade Services Bank in the Middle East and North Africa 2008
Best Online Trade Finance Bank 2007 – 2008
Best Factoring House 2003-2008
Best Trade Finance Bank in the Middle East & North Africa 2006 - 2008
Best International Trade Bank in China 2008
Best International Trade Bank in Malaysia 2008
Best International Trade Bank in Pakistan 2008
Best Factor provider Poland 2008
Best Factor provider UK 2008
Best Debt House Turkey
Best Domestic Cash Management Bank in India, Indonesia, Malaysia, Brunei,
Taiwan and Sri Lanka, 2008
Overall Customer Satisfaction Rated No 1 in Asia, 2008
Best Cash Management House in Asia, 2008
Best Bank in Hong Kong 2001-2008
25
Best Cash Management Bank in Middle East, & Africa 2008
Best Bank in Asia for Cash Management, 2008
Best Trade Finance Bank in Asia 1999 - 2008
Best Trade Finance Bank in Hong Kong 2008
Best Trade Finance Bank in Taiwan 2008
Best Trade Finance Bank in Vietnam 2008
Most Innovative Trade Solution 2008
Best Transaction Bank in Asia, 2008
Best Transaction Bank in Hong Kong, 2008
Best Cash Management – Hong Kong, 2008
Best Cash Management Bank in Southeast Asia, 2008
Best Bank for Payments and Receivables, 2008
Best Trade Finance Bank in Asia 1997 - 2008
Best Trade Finance Bank in Hong Kong 2008
Best Cash Management Bank in Hong Kong, 2008
Best Foreign Commercial Bank in China
Best Foreign Commercial Bank in Vietnam
Best Foreign Commercial Bank in Malaysia
Hong Kong – Best Local Cash Management Bank
Indonesia – Best Foreign Cash Management Bank
Taiwan - Best Foreign Cash Management Bank
Best Trade Finance Bank 2003 - 2008
Cargonews Asia
The Most Innovative Cash Management Provider in Asia, 2008
Best Trade Bank in Asia 2008 – Trade and Forfaiting Review