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India Targets China: Record 150 Special Economic Zones Approved
India’s transition to an export-oriented manufacturing economy to augment its successful services-based economy crossed a milestone with the approval of 150 Special Economic Zones (SEZ) proposals within six months of the SEZ Act. The proposals submitted by Indian and foreign companies to set up businesses in these zones, resulted in a record $6 billion of investor commitment that will provide employment to as many as half a million people.
Half the proposals accepted came from manufacturing and related industries. Alternative energy proposals totaled $2.2 billion, most notably from the U.S. and Germany. Not surprisingly, the other half of the proposals came from the Information Technology (IT) industry that was responsible in $23.6 billion in export revenue contributing 4% of India’s GDP in 2005. There are another 200 proposals pending review. Industry experts estimate India can allow as many as 300 SEZ’s, which will attract $20 billion in total investments.
India is promoting itself as a competent and inexpensive manufacturing base for multinationals as it seeks to compete with China for the production of goods even as China is competing with India in IT and knowledge-based services such as customer support and accounting. Clean energy is also high on India’s priorities as it seeks to serve its growing energy requirements and reduce dependency on expensive oil imports that’s largely responsible for its annual trade deficit.
Clean and Energy: Two Words That Bring Investors & Government Together
The demand for clean energy has caused a flurry of private equity investment in the sector. Suzlon Energy Limited, world’s fifth largest wind-turbine manufacturer that’s listed on the Bombay Stock Exchange with a market value of almost $8 billion, attracted more than $22 million from private equity firm ChrysCapital. Shriram EPC, the engineering services unit of Chennai-based Shriram Group, attracted $22 million in investment from among others, Bessemer Venture Partners.
India’s first solar energy SEZ was also set up near Delhi. Moser Baer India Limited, the world’s largest manufacturer of CDR/RW and second largest manufacturer of DVDR/RW format optical media discs, has set up a photo voltaic (PV) cell and module manufacturing project with 80 MW capacity.
With investment requirements totaling $73 billion over the next five years to meet the target set by the Indian Ministry of Power to provide reliable, affordable and quality power to all by 2012, India offers a lucrative market for those in the energy business. India’s demand for energy will nearly double by 2012 to 200 Giga Watts from a current installed capacity of 125 Giga Watts.
Online Spending to Exceed $500 Million in 2006; VCs are Knocking
The growth in India’s Internet user base expected to reach 100 million by 2010 from 70 million today, has resulted in renewed venture capital interest in funding start-ups seeking to tap online spending.
Venture capital investment in India’s growing online market is likely to be 10 times that of last year. Silicon Valley VCs such as Kleiner Perkins Caufield & Byers and Sequoia Capital and corporations such as Yahoo! Inc. led $44 million worth of financing in the first six months of 2006 in online travel and classifieds sites compared with a total of $10 million invested in Indian Internet companies in 2005.
Internet users are mostly among India’s affluent and price sensitive 300 million middle class who are able to spend on goods ranging from computers to travel tickets. E-commerce revenue is expected to double this year to more than half a million dollars from $262 million last year.
Investments in the Internet are only part of the overall private equity story. At $44 million, they’re more than 1% of the $3.47 billion pumped in by VCs and private equity firms in the first half of this year. Already, that’s almost twice the $2 billion of investments made during all of last year.
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Bundeep Singh Rangar
Chairman, IndusView
Bundeep.Rangar@IndusView.com
www.indusview.com |
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Volume 2 Issue 10 | 5th September 2006 |
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Industry Stories |
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Mega Deals
It was a fortnight of $600 million-plus deals. While ONGC Videsh Limited, the overseas subsidiary of the state-owned largest Indian company Oil and Natural Gas Corporation Ltd. was on the top of the chart with a joint bid of $800 million alongwith Chinese state-owned firm Sinopec to buy 50% stake in Columbian oil firm Omimex de Columbia, the Tata Group, India’s largest industrial conglomerate went ahead with the largest overseas acquisition by a private Indian company. It has announced purchasing 30% stake in Energy Brands Inc., producers of flavoured water bottles, of the U.S. for $677 million. On the reverse side, the second- largest U.S. generic drug maker Mylan Laboratories Inc. acquired 71.5% stake in Secunderabad-based Matrix Laboratories Ltd. for $736 million.
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News Makers
It’s again a reverse outsourcing deal from India. Bharti Airtel Ltd, the largest GSM mobile operator of India, has signed a three-year, $1-billion network expansion deal with Telefonaktiebolaget LM Ericsson, the world's largest supplier of telecommunications equipment. Earlier, Bharti Airtel had entered into two similar deals with Ericsson—first a $400-million deal in 2004 for building and managing its networks across 13 circles followed by another $250-million deal in 2005. Bharti has a similar deal with Nokia Oyj, a leading supplier of mobile and fixed telecom networks, also for managing its networks in some of its telecom circles. Similarly, International Business Machines Corp., the world's largest computer-services provider (IBM) manages all the IT infrastructure of Bharti under a $759 million deal signed in 2004.
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Agents of Change:Tulsi R. Tanti
He deployed windmills to reduce the energy cost of his textile mill, but ultimately closed down the textile mill to spearhead the wind energy business. He proved that the alternative energy sources are not meant for laboratories only but also have a good business case. Today, Tulsi Tanti’s Suzlon Energy is the world’s fifth largest wind turbine manufacturer, and Tanti himself is counted as the fourth richest Indian.
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Special Report:Low Cost Airlines
Low-cost carriers (LCCs) have won 38.5% market share of the Indian domestic air-travel market in a short span of just three years. While the domestic air-travel market is growing by almost 50% year-on-year, the LCCs are expected to attract most of the new air travelers.
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Factoids
Indian telecom growth story remained intact in the month of July 2006 also, with the mobile subscriber base swelling by 5.28 million more subscribers to reach at 111.23 million. The total telephone subscriber base including fixed line has now reached at 158.59 million.
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IndusView News
In less than a year since IndusView announced the commencement of its operations, it has met with success from all quarters. The IndusView networks spanning corporates, professionals and government organizations, as well as the clients across verticals and geographies, have seen great value in associating with IndusView owing to its strong research base.
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Company Watch: WNS (Holdings) Limited
WNS (Holdings) limited, the second largest third party business process outsourcing (BPO) company of India, recently became the first Indian BPO company to get listed on NYSE. On the day of listing itself, the market value of WNS touched about $1 billion. In the first month of listing, the stock of WNS yielded about 43% return to its investors.
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Market Watch
The mood in the Indian stock market changed in the month of August 2006. Sensex, the benchmark index of the Bombay Stock Exchange, rose 995 points or 8.9% to close the month at 11,699 points, thanks to the return of buying from the foreign institutional investors (FIIs) as well as domestic mutual funds.
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Events
National Association of Software and Services Companies (NASSCOM), the industry body representing about 900 Indian IT companies, is organising NASSCOM Quality Summit 2006 on September 5-7, 2006 in Bangalore. The summit, which will consist of experts of the industry, will primarily deal with the global aspect of the quality part of the business, with the theme being ‘Setting Benchmarks in Global Outsourcing’.
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About IndusView
IndusView advises multinational companies on business opportunities emanating from India’s fast growing economy. It de-risks the growth ambitions of multinational companies operating as a trusted partner that understands the complexities of the Indian market and the commercial drivers of western enterprises.
IndusView provides strategic insight, competitive intelligence, research and execution capabilities to manage large vendor and corporate finance transactions.
More at www.indusview.com
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