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 Did you know India is the world s largest democracy 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 1600 1400 1200 1000 800 600 400 200 0 785 2005 India GDP (USD Bn) 1638 1381 1115 1175 1175 877 2006 2007 2008 2009 2010e 2011e Source: HSBC Research 4
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 Did you know India is the world s 12 th largest, 2 nd fastest growing economy GDP 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
Trade flows India Rank Imports (Top 10) %Growth %Share 1 China 19.7 10.7 2 UAE 76.5 7.8 3 Saudi Arabia 2.6 6.6 4 USA (11.9) 6.1 5 Iran 13.1 4.1 6 Germany 21.5 3.9 7 Switzerland 21.6 3.9 8 Australia 42 3.6 9 Kuwait 24.5 3.2 14 Singapore (5.7) 2.5 Rank Exports (Top 10) %Growth %Share 1 UAE 56.5 13.2 2 USA 2.0 11.4 3 China (13.9) 5.0 4 Singapore 14.4 4.6 5 Hongkong 5.4 3.6 6 UK (0.8) 3.6 7 Germany 24.7 3.4 8 Netherlands 20.9 3.4 9 Saudi Arabia 37.7 2.8 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 7 6 5 4 3 Exports from India (USD Bn) % Share 5.30% 4.60% 4.80% 4.50% 5.43 6.05 7.38 8.44 6% 5% 4% 3% 2% Major items of trade Exports from India: Mineral oils & fuels Jewellery, precious stones Imports into India: Products of mineral oils Electrical equipment 2 1 0 2006 2007 2008 2009 1% 0% Electrical machinery Aluminium and products Organic chemicals Optical/Medical instruments 9 8 7 6 5 4 3 2 1 0 Imports into India (USD Bn) % Share 3.2% 3.0% 2.5% 2.3% 3.35 5.48 8.12 7.65 2006 2007 2008 2009 3.5% 3% 2.5% 2% 1.5% 1% 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 Source: Ministry of Commerce, Govt. of India 9
Section 3 Doing Business in India 10
What can you do in India? Did you know In area terms, India is 70% the size of Europe Tap the consumer base Tap the cost advantage Tap the trade opportunity Access India Tap industry expertise Tap the talent pool Tap the financial opportunity 11
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 Did you know 100 of Fortune 500 have R&D facilities in 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
How can you access India Did you know India has the world s second largest pharma industry after China 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
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 Did you know India is the world s second largest small car market Key objective Sustainability Business model Access India: Plotting the roadmap Infrastructure Legal framework Financial investment 16
Accessing India A case study Key Objective 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 Business Model JV with Indian company Setup Indian company Part outsourced Franchise model Sustainability Capacity expansion: Rapid growth Tackling diversity: Local markets Improving cost efficiency: High volume - Low value Investment in R&D: Local innovation Infrastructure Location: Government policy Property: Lease v/s buying Supply chain & logistics: Trusted partnership Resourcing: Skill matching Distribution & Marketing: Market knowledge Legal framework - Starting business 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) Financial Investment 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 17
Some attractive sectors Did you know India is one of six countries that launches it s own satellites Market sectors with the most upside potential in India in the next three years Basic Materials Other Media & Publishing Transportation Oil & gas, energy, utilities Travel, hotel & tourism Automotive Health care, biotech & pharmaceuticals Agriculture, food processing Capital goods & industrials Consumer goods & services & retailing Real Estate Construction Communications, technology & telecoms 3% 5% 6% 10% 10% 12% 14% 16% 18% 22% 29% 32% 38% 41% Banking, finance & insurance 57% Source: Investment Climate in BRIC Nov06: Survey of CFA institute members 18
Section 4 HSBC in India 19
HSBC in India The Leading International Bank in India Coverage with 50 branches Presence in 29 cities Plan for over 30 new branches* Chandigarh Ahmedabad Vadodara Mumbai Ludhiana Jaipur Surat Noida New Delhi Gurgaon Patna Raipur Indore Nashik Nagpur Guwahati Kolkata Pune Bangalore Mysore Hyderabad Chennai Visakhapatnam Trivandrum Kochi Coimbatore 20 *Subject to approvals
A full servicing offering Trade Services Export/Import Financing Documentary Credit Structured Trade Finance Instant@dvice Documentary Collection 9.6% & 9.3% of India s exports and imports throughput Business Finance Financing of fixed assets and working capital Local and foreign currency loans Channel financing Bill Discounting Domestic and export factoring Transaction Banking Payments & Cash Management Global e-banking package - HSBCnet Host to Host solution - HSBC Connect End-to-end supply-delivery chain solutions Coverage of 4000 locations - Over 500 top tier clients Flexible MIS/Automated Reconciliation Services Treasury and Capital Market Foreign Exchange products Interest rate products Customised/ structured solutions 21
Our Approach Did you know India is the largest producer of milk, 2 nd largest of food 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
Providing the right solution at each stage of the business Initial Stage Growth Stage Consolidation Banking Requirements Current Accounts Internet Banking Access to over 23,000 VISA ATMs Trade Services Cash Management Relationship Manager Transaction Banking Forex management / Treasury Lending lines for Trade / Working capital Escrow Services IPO Services Term Loans Multi currency accounts Outsourcing (Payroll / Payments) Seamless cross border banking Growth funding (PE / capital markets) Aquisition Funding / Investment Banking Risk management Factoring Solutions Unsecured Business overdraft Commodities Financing Growth funding (PE / Capital Mkts) Loans against Property Time Scale Start up Stable Business Rapid Growth Niche Market Position Market Leader (Global / Local) 23
A success story 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 HSBC Facilities Checking accounts FX limits Working Capital Fex limits Facilities - $7m Term loan PCM and Trade HSBCnet 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+ Corporate Evolves Aggressive growth 2 new centers Acquisition of $10M Goes Public $ 54M 2003-04 $20m 2004-05 $55m 2005-06 $102m 2 new facilities 2006-07 $130m Acquisition of $6.5M 2007-08 $180m 24
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 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 25