Investing in India: Those Fifty Shades of Grey

by mergermarket, 28 June 2012

0 comments

Facebook

Digg

Twitter

topics:
Management

tags:
due diligence foreign investment M&A

India represents vast potential for growth across nearly every industry, but in recent months a number of factors have made it an increasingly challenging environment in which to operate.

While GDP grew approximately 10% in 2010, it slowed to less than 8% in 2011 and the same is expected for 2012, according to estimates.

In recent years, headline corruption cases have tarnished the country’s reputation, and bureaucracy in the world’s largest democracy has been a well-documented impediment to progress. What’s more, India’s opaque business environment presents challenges for multinational organizations, especially in the age of stringent anti-corruption and bribery legislation.

Recently, foreign investors have taken issue with proposed laws surrounding capital gains taxation, and for the time being, their voice seems to have been heard by the Indian government as the implementation of the law has been pushed back to next year.

Another case in point is the short-lived legislation allowing foreign direct investment in the country’s retail sector, a move that would have opened up the market to the likes of Wal-Mart and Carrefour. This legislation was opposed by Indian politicians and quickly dropped.

Now more than ever, foreign investors currently operating or looking to invest in India must take the time to understand risks in the Indian business environment. Reshmi Khurana, India country head for Kroll Advisory Solutions, spoke to M&A intelligence service mergermarket about fraud, corruption and operating challenges in India.

In light of slowing economic growth and headline corruption cases, how is foreign investor sentiment in India?

Despite some near-term challenges, India is a promising place to invest and foreign perceptions remain strong on a macro level.

Corruption and legal battles are nothing new in India, but they are now coming to the forefront as the economy slows. Indian companies are also giving more attention to exposing fraud and corruption, which is a step in the right direction and will likely precipitate more cases in the near future.

From an economic standpoint, growth is still projected to be between 7-8%, and from an investment perspective, India’s government protects against some of the legal and political risks found elsewhere in Asia. The bottom line is that fundamentals are strong and acquisitive investors will stay focused on the fundamentals.

How would you advise investors looking to make an acquisition in the near-term?

While valuations are weak, now could be the time to buy. Plan for the next 6-12 months to be challenging, but keep long-term synergies in mind.

Also, prepare to be patient. India’s democratic decision-making process means that regulatory change and economic reform is going to be slow. Take this as a given and plan around it.

Comment on this article

Your name: *

E-mail: *

The content of this field is kept private and will not be shown publicly.

Homepage:

Comment: *

Web page addresses and e-mail addresses turn into links automatically.
Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <a> <p> <span> <div> <h1> <h2> <h3> <h4> <h5> <h6> <img> <img /> <map> <area> <hr> <br> <br /> <ul> <ol> <li> <dl> <dt> <dd> <table> <tr> <td> <em> <b> <u> <i> <strong> <font> <del> <ins> <sub> <sup> <quote> <blockquote> <pre> <address> <code> <cite> <embed> <object> <strike> <caption>
Lines and paragraphs break automatically.
Use  to create page breaks.

More information about formatting options

Verification Code

This question is for testing whether you are a human visitor and to prevent automated spam submissions.

What is the second word in the phrase "ranah dulaj epikun olec ubilubi"?: *

Accounting and Regulations

CFO innovation Asia Accounting and Regulation the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Accounting Regulation, IFRS, US GAAP, Tax, investor relations, corporate governance, Corporate Law, Financial Regulators, Internal Audit, Audit, Corporate Law.

Auditing, Investor Relations, Law and Compliance, Tax

Finance and Banking

CFO innovation Asia, Finance and Banking the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Corporate Finance, trade finance, treasury and risk management, capital expenditure, Banking, mergers and acquisitions

Cash and Liquidity Management, Corporate Finance, Insurance, Treasury Management

Management

CFO innovation Asia the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Management, Corporate Governance, Human Resource Management, Compensation and Benefits, Mergers and Acquisitions, Professional Development, Corporate Real Estate, Risk Management, Budgeting and Forecasting, Business Process Management, Business Process Reengineering, Outsourcing.

Budgeting and Planning, Business Expense Management, Human Capital Management, Outsourcing and Shared Services, Risk Management

Metrics

Corporates, Financial Services

Technology

CFO innovation Asia Technology the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Systems, Business Intelligence, EPR, Accounting software, CRM, Cloud Computing, Telecommunications, Business Process Outsourcing, Business Process Management Software.

Business Intelligence, Enterprise Software and Systems, Financial Systems, Security