FDI inflows register unprecedented growth of 185% during the first quarter

During the financial year 2006-07, the FDI equity inflows have been US $ 15.7 billion as compared to US $ 5.5 billion received during 2005-06. This is a growth of 185% as compared to the previous year. This is also the first time that FDI equity inflows into India have crossed the US $ 10 billion mark. If reinvested earnings and other capital inflows are also included, the total inflows in 2006-07 add up to US$ 19.5 billion compared to US$ 7.7 billion during the same period last year showing a growth of 153%.

During the first quarter of the Financial Year 2007-08, the FDI inflows have been US$ 4.9 billion as against US$ 1.7 billion received during the corresponding quarter of 2006-07, registering a growth of more than 185%. The first six months of the current calendar year (January-June 2007) have witnessed FDI inflows of US$ 11.4 billion as against US$ 3.6 billion received during the same period in 2006.This indicates a growth of 218%.

Higlights of FDI inflows till May, 2007:-

• Major Sectors - Services, Telecom, Electrical Equipments, Real Estate and Transportation are the 5 major sectors receiving FDI inflows in 2007-08.
• Top Inflows - M/s. Vodafone (Mauritius) (US$ 801 million) (telecom), M/s. Matsushita Electric Works, Japan, (US $ 342 million) (electrical products), M/s. GA Global Investments Ltd., (US$ 258 million) (National Stock Exchange), M/s. EMAAR Holdings, Mauritius (US$ 204 million) (Real estate construction), M/s. L B India Holdings Mauritius Ltd. (US$ 118 million) (Real Estate) are the top foreign investments received during the current financial year.
• Leading Regions - Delhi Regional Office of RBI registered inflows of US$ 1.3 billion amounting to around 36% of the total inflows during the year. Mumbai, Bangalore, Chennai, and Hyderabad are the other major regions, which have received FDI inflows. The five regions mentioned above constitute two-thirds of the total inflows received.
• Top Investing Countries - The total inflows received from the top 5 investing countries during the first two months of the financial year are US$ 2.9 billion. Major investment (US$ 1.9 billion) during 2007-08 came from Mauritius. The other major countries investing are Japan, Cyprus, USA, and Singapore.

Source: Ministry of Commerce & Industry

Tata Tea sells its stake in Glaceau

Tata Tea has announced the sale of their 30% stake in the US-based vitamin water maker Glaceau to Coca-cola for $1.2 billion, making a profit of $523 million in the deal. Mr. R.K. Krishna Kumar, vice-chairman of Tata Tea and a director of Tata Sons, the investment arm of Tata Group, said that they would use the funds to make Tata Tetley debt free. The total debt of Tata Tetley is estimated at $600 million.

Tata Tea paid $677 million for the acquisition of the 30% stake in Glaceau which was held by TSG Consumer Partners in August, 2006. Mr. Krishna Kumar said that they were looking at launching a whole range of products and health drinks. in the future. He said that they had learnt a lot from their experiences at Glaceau in the ready-to-drink market space. They were now open to further acquisitions upto $100 million and more, most of them in US market. "which is most attractive". He however didi not rule out acquisitions in Europe. Tata Tea would like to be a significant and leading player in the ready-to-drink, enhanced tea segments ridding on the health platform.

Coca-cola is seeking to bolster its portfolio of non-carbonated beverages in the face of slowing soft drink sales in its home market said Reteurs in a report. The company will start offering Glaceau products, which include vitamin water, smart water and vitamin energy drinks.

Related Articles:-

1. Tata Tea harvests Rs 4,900 cr as Coke takes over of Glaceau - Financial Express - 26-05-2007

2. Coca-Cola to buy Glaceau for $4.1 billion - Reuters - 26-05-2007

GDR/ADR route unlikely for realtors

Real esate companies are likely to be barred from issuing American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). The reason: it may be difficult to enforce the conditions attached to foreign direct investment in real estate, particularly, the stipulation that investors must lock in their investments for a minimum period of three years.

This condition, which would be appliable to foreign institutional investments as well has been introduced to artificial inflation of prices and sudden flight of capital in this sector. The RBI is particularly cautious about the nature of capital invested in this sector, as it is easy to build up asset bubbles that could prove dmamaging for the entire economy.

The government is expected to come out with guidelines for pre-IPO placement in the realty sector soon. ADRs and GDRs are completely fungible and can change hands and defeat the verystipulation of the lock-in period which is present in the FDI guidelines. In fact, the government may keep a three-year lock-in period for even foreign institutional investment (FII) which comes in through the pre-IPO route.

Real estate is a sensitive sector for which the government has put in place certain conditions for FDI such as a three year lock-in period, minimum capitalisation of $ 5 million for joint ventures and $10 million for wholly-owned subsidiaries and development of at least 10 hectares of land. Though the government had fully opened FDI in real estate in 2005, it imposed these restrcitions because of the sensitivities involved with the sector.

Related Articles

1. Banks warned on real estate exposure

2. RBI tightens screws to avoid asset bubble

3. RBI seeks ECB details from real estate firms

4. Foreign Direct Investment: Investing in Real Estate in India

5. Sector Specific Foreign Direct Investment in India: FDI in India

The Government is liberalising the FDI policy in Real Estate MFs

The government is considering allowing Foreign Direct Investment (FDI) up to 49% and tax benefits for real estate mutual funds. SEBI is in final stages of framing guidelines for products that will alow retail investors enjoy the benefits of owning a slice of the ever booming Indian real estate market. Internationally, real estate mutual funds are called Real Estate Invetsment Trusts - REITS in short. REITs are companies that buy, sell manage and develop real estate assets.

Much like mutual funds, REITs put together the investments of many individuals and institutions and then deploy this money in real estate. So, people wanting to have a pie in the real estate growth phase mo do so now by buying hsares in REIT or units in real estate MFs.

The main area of concern is disclosure norms and valuation of real estate assets of these mutual funds. It is difficult to value a property on regular intervals like day-to-day unlike other equity and money market instruments. Besides, valuations would depend on the valuer. The market regulator is expected to extend some of the strict disclosure and valuations proposed for real estate IPOs to real estate mutual funds as well. The advisory committee is suggesting a period not more than two months for declaring net asset values and portfolio. In line with real estate IPO norms, the projection of the value of the land may be made only on the present "realisable" value instead of the future projection.

Officials from the legal department of SEBI, a couple of key officials of HDFC Mutual, representatives from the Institute of Charted Accountants of India (ICAI), The Association of Mutual Funds in India (AMFI) and a SEBI nominated independent CA have been meeting over the past few months to finalise rules about disclosures and accounting standards to be adopted. The SEBI is also expected to announce which entities would be allowed to launch such a fund and the minimum investment amount for the investors.

Related articles

1. Report Of The Sub-Committee Appointed By Amfi To Formulate A Working Plan For Launching Of Real Estate Investment Schemes

2. Real Estate Funds

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Govt. to tighten the grip on FDI inflows

The government is considering various proposals to redraft the Foreign Direct Investment (FDI) norms to plug the existing loopholes. Presently there are sectoral caps for various sectors for FDI in India. These limits are maily in the form of caps by way of equity or share capital. Now, the want to include indirect holding of foregn entities in Indian companies as well as the definition of indirect holding. But these changes will be prospective and will not applicable to existing investments.

It is likely that interest-free loans given by the foreign partner (or loans for which it has stood guarantee) to the Indian partner for investing in the joint venture (JV) as well as fully convertible preference shares issued to the foreign partner will be treated as indirect foreign holding and will come within the purview of the FDI sectoral cap. In addition, if the foreign investor has an equity stake in a domestic company which, in turn, holds shares in the JV, the loans advanced by the domestic company to the JV will also be considered as indirect holding.

If these proposals are implemented, it could have sweeping effect on sectors such as retail, insurance, aviation, defence and stock-broking where there are FDI sectoral caps. At the moment, there are four distinct FDI slabs — ranging from 100% to a complete bar in some sectors. The telecom sector has a 74% sectoral cap, the aviation sector has a 49% sectoral cap, and the insurance sector has a 40% sectoral cap.

These moves to tighten the FDI guidelines come in the wake of controversy sorrounding the Hutchison Essar shareholding, while acquired by the Vodafone.

Related Links :-

SECTOR SPECIFIC GUIDELINES ALONG WITH CAPS FOR FOREIGN DIRECT INVESTMENT

MANUAL ON FOREIGN DIRECT INVESTMENT IN INDIA

Finer print of Bharti, Wal-Mart JV

Bharti's joint venture with Wal-Mart for cash-and-carry will be 50:50 one, with a condition that if any startegic or financial investor were to be brought in, then both partners will dilute stake equally.

The present policy restricts FDI in retail to single-brand ventures, with a cap of 51%. However, 100% FDI is permitted in wholesale cash-and-carry, where one can sell only to retailers and distributors, and not to the customers. besides, 100% FDI is also allowed under the automatic route inwarehousing services and refrigeration of agricultural products. While Bharti retail will enter into a franchise agreement with Wal-Mart for front-end retail, the two companies are forming a joint venture for the sourcing and cash-and-carry business. The first retail store under franchise may be opened on August 15 next year.

Bharti required the technology and the expertsie in logistics, supply chain management and cold chains and also needed to link up with the suppliers and producer communities and the tie-up with Wal-Mart would help towrards this.