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proportion of foreign investment in acquisition of shares increased from 17 per cent in 2000 to 28 per cent in 2006. The value of fresh investments has increased from $2.3 billion during 2000 to $33 billion during 2008. Over the same period, the investment through acquisition of shares increased from $0.5 billion to $6.2 billion. A much stronger growth in inflows through acquisitions is observed due to relatively lower figures in the initial years. Though investment in new projects always exceeds the investment in acquisitions by at least two and a half times, the gap between these two modes widened in 2007 and 2008. In 2008, foreign investment in newer facilities was almost five times the expenditures incurred in acquisitions. This brings forward a clear preference of the foreign investor to start a new business set-up or fund an expansion through infusing fresh capital in India compared to purchasing or attaining a stake in an existing one. 3.5 Profile of Greenfield FDI – India The number of greenfield investments in India increased from 247 projects in 2000 to 980 projects in 2006, but declined to 682 projects in 2007. According to OCO Consulting (cited in Bloodgood, 2007, pp. 2-6), greenfield investment is India is largely destined for new facilities rather than for expansion of existing units. The share of expansion projects has been declining steadily over the period, from 22 per cent of the reported projects in 2002 to 11 per cent in 2006. During the period 2002 to 2006, 15 of the 300 greenfield projects that were reported exceeded $1 billion in their worth. These investment projects were concentrated in heavy industries, property, tourism and leisure, and electronics. Further, a classification based on their business function indicates their spread among manufacturing, construction, resource extraction and R&D. The investor countries included Canada, Germany, Japan, Luxembourg, the Netherlands, Singapore, South Korea, Venezuela, the UAE, the UK and the US. The beneficiary industries of these greenfield investments included a wide range of industries such as steel, electronic components and semiconductors, construction, mining, real estate and machinery. 3.6 Profile of Cross-border M&A investments – India The growth in number of M&A deals in India has been less impressive than the number of greenfield investments (Table 3.4). Based on the Zephyr Mergers and Acquisition database, Bloodgood (2007) found that 167 M&A deals in India accounted for investment worth $5.6 billion during 2007. Of 15 M&A transactions during 2002-06, several were made with US firms, as well as with firms from Mauritius, the UK, Switzerland and the British Virgin Islands. These 15 most significant deals were spread across manufacturing sectors, such as electronics, cement, pharmaceuticals and food-processing. The service sector included computer software services, investment-banking services, BPO, insurance and port services. Table 3.4 M&A Deals in India Years Number of deals $ million 2004 80 1760 2005 121 3754 2006 161 4740 2007 167 5580 2008* 66 2254 Source: UNCTAD (various years). World Investment Report. Note: * Number of cross-border M&As refers to the first half of 2008. MERGERS & ACQUISITIONS AND GREENFIELD FDI According to information in UNCTAD’s World Investment Report (2008), the value of cross-border M&A sales by India increased from $4,740 million in 2006 to $5,580 million in 2007 and purchases from $6,586 million in 2006 to $30,414 million in 2007. The number of sales deals increased from 161 to 167 and purchases from 162 to 194. This implies that the average sales deal size increased from $29.4 million in 2006 to $33.4 million in 2007. The 29
FDI IN INDIA AND ITS GROWTH LINKAGES increase in average purchase deal size was extremely large – from $40.7 million in 2006 to $156.8 million in 2007. As mentioned before, explicit information on mergers executed in India is not available. The only sources of such information are either private databases or individual researchers. In addition to the databases on greenfield investments previously mentioned, Ramakrishnan (2008) analysed financial data pertaining to 87 pairs of merged firms; the mergers were executed between 1996 and 2002. He found that 64 of these mergers belonged to related industries, while the remainder were in unrelated industries. For as many as 76 of these mergers, stock was the predominant mode of payment for the acquired firm, while corporate control was transferred in 37 mergers. Moreover, 14 of the acquired companies had been declared sick at the time of the merger. The inflows through acquisition of shares registered an average growth of 55.7 per cent from 2001 to 2008. Such inflows registered positive growth throughout the period except in the years 2003 and 2007. Details of the 10 most significant acquisitions are presented in Table 3.5. Most of these acquiring foreign companies belonged to Mauritius, Singapore, the US and Japan. 30 Table 3.5 Top 10 Acquisitions in India S. No. Top 10 Indian Country Foreign Items of FDI Received Companies Collaborator Manufacture (in Rs.) (in US$) 1 iflex Solutions Mauritius Oracle Global Mauritius IT to financial services 25788.8 563.9 Ltd. industry 2 Flextronics Software Mauritius Flextronics Sales & Communications solutions 4659.3 104.0 Systems Limited Marketing 3 Blue Dart Express Ltd. Singapore DHL Express (SGP) Logistics and courier business 4253.0 97.2 Private Limited 4 Colgate Palmolive Singapore Colgate Palmolive Asia Manufacturing/marketing of 3803.0 86.7 India Limited India Limited cosmetics/toilet soap/toothpaste 5 United Breweries Country not Scottish and New Castle Alcoholic products 2482.1 56.8 indicated India Limited 6 Crisil Limited USA S&P India LLC 2418.7 55.6 7 Telco Constructions Japan Hitachi Constructions Manufacturing/sale of 2043.0 44.8 Equipments Company Machinery Company construction equipment/ Limited earth-moving machinery 8 Jubilant Organosy Cyprus GA European Manufacturing 1292.2 29.7 Ltd Investments Ltd. chemicals/adhesives 9 Tata Honeywell USA Honeywell Asia Manufacturing 1256.9 28.6 Limited Pacific Inc. 10 Binani Cement Ltd. Mauritius Silver Peak Investment Cement, concrete 1200.0 26.8 (Mauritius) Ltd. Source: SIA Newsletter, Annual Issue 2005.
Page 2 and 3: FDI IN INDIA AND ITS GROWTH LINKAGE
Page 4: PROJECT TEAM Study Team Project Lea
Page 7 and 8: linkages with the economy. The sect
Page 10: Contents Executive Summary Chapter
Page 13 and 14: Chapter 5: FDI: Linkages with the E
Page 16 and 17: Executive Summary Foreign direct in
Page 18 and 19: EXECUTIVE SUMMARY petroleum product
Page 20 and 21: Chapter 1: Introduction 1.1 Backdro
Page 22 and 23: section industry data. However, the
Page 24 and 25: in India stood at $23 billion, show
Page 26 and 27: viii) Backward and Forward Linkages
Page 28 and 29: Chapter 2: FDI Scenario in India: T
Page 30 and 31: Secretariat for Industrial Assistan
Page 32 and 33: Table 2.2 shows that FDI outflows f
Page 34 and 35: at about 2 per cent or less of the
Page 36 and 37: Table 2.5 Sector-wise Break-up of F
Page 38 and 39: Table 2.7 FDI in India in the Servi
Page 40 and 41: Figure 2.4 Country-wise FDI Inflows
Page 42 and 43: 2.10 Foreign Technology Transfers A
Page 44 and 45: Chapter 3: Mergers & Acquisitions a
Page 46 and 47: Table 3.2 Short-term effects of FDI
Page 50 and 51: Chapter 4: Special Economic Zones (
Page 52 and 53: 4.4 Management of SEZs SEZs are und
Page 54 and 55: in the eight major SEZ’s exports
Page 56 and 57: Foreign Direct Investment in SEZs S
Page 58 and 59: In a span of a few years, there hav
Page 60 and 61: SPECIAL ECONOMIC ZONES (SEZS) AND F
Page 62 and 63: existing infrastructure, (b) exploi
Page 68 and 69: Chapter 5: FDI: Linkages with the E
Page 70 and 71: construction (4200); fuels, includi
Page 72 and 73: FDI: LINKAGES WITH THE ECONOMY S. N
Page 74: Table 5.5 Sector-wise FDI in India
Page 92 and 93: Chapter 7: Primary Survey: Analysis
Page 94 and 95: the North and South zones, whereas
Page 96 and 97: PRIMARY SURVEY: ANALYSIS AND RESULT
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Table 7.1a Distribution of Surveyed
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Table 7.2b Zone-wise Distribution o
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Table 7.3b Zone-wise Distribution o
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Table 7.6a Number of Employees in S
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Table 7.7a Mode of Transport from F
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Table 7.8a Number of FDI-enabled Fi
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Chapter 8: FDI Data Reporting and C
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sector, non-profit institutions ser
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three categories, namely, (i) inves
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Table 8.1 Trends in FDI Inflows to
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FDI DATA REPORTING AND CLASSIFICATI
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Table 8.3 Trends in FDI Inflows by
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Table 8.5 DIPP Classification of FD
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SECTOR-WISE CODE 3700 DEFENCE INDUS
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S. No. DIPP DIPP Activity NIC 2-Dig
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Chapter 10: Key Findings and Salien
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Findings � About half the total o
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7. Forex Implications: To understan
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manufacturing firms taken together.
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References Australian Bureau of Sta
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for economic growth and poverty all
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Tables for Chapter 6
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