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Hang on, India still hot for overseas investors

Wednesday, 1 January 2014 - 12:08pm IST | Place: Mumbai | Agency: DNA
Global slowdown, other concerns fail to fade country's attraction as an investment destination.

Despite economic slowdown (growth slowed to the lowest level in the last decade), the rupee meltdown, political tumult and persistent US tapering-related concerns about foreign money outflows, the attractiveness of India as an investor destination displayed remarkable
resilience. In 2013, foreign investors reaffirmed their faith in the India growth story. And how!

Through multiple routes – foreign institutional investors or FIIs, foreign direct investment (FDI), multinational corporations raising stakes in their Indian subsidiaries – foreign money poured into India in spite of everything.

FIIs bought equities worth over Rs1.12 lakh crore, the third-largest inflows after 2010 (over Rs1.36 lakh crore) and 2012 (over Rs1.29 lakh crore). As capital was easily available, that, too, at a lower cost, globally, money found its way into all global equities, including Indian stocks, believe experts.
They attribute this to the easy money policies of the world’s three biggest central banks: the US Federal Reserve, European Central Bank and the Bank of Japan.

Avinash Gupta, national leader and head, financial advisory services, Deloitte India, says that strong FII flows is a manifestation of what’s happening globally – the cost of money is quite low.
“Though economic growth has been weak in 2013, money continues to chase growth as FIIs have made investments selectively in companies which have been growing much faster than the economy.”
The consumption story continued to attract investors even as capital-intensive infrastructure projects did not see that many inflows.

The year’s first sign of foreign investors’ bullishness about India emerged when the UK-based GlaxoSmithKline (GSK) put in around Rs4,800 crore to raise its stake in its consumer healthcare arm in India to 72.5% from 43.2%.

This was followed by Anglo-Dutch FMCG giant Unilever making an open offer, spending Rs19,180 crore to increase its stake in its Indian arm Hindustan Unilever (HUL) to 67.28% from 52.48%.

As the year drew to a close, GSK reinforced its faith in India by announcing that it will raise its stake in its Indian pharmaceutical arm as well by infusing Rs6,389 crore.

“The retail and consumer products sector witnessed strong inbound deal momentum, with heavy activity in the food and beverages segment. Foreign investors are betting big on the Indian consumption story,” said global advisory and consulting firm EY in a report.

If FIIs and MNCs were gung-ho about India, the FDI route was no less active. As much as over $18 billion poured into India in the January-October period alone, comparable to an average of $25 billion investment in each of the last three years.

The year saw Britain’s Tesco announcing plans to invest $110 million (Rs 682 crore) in Tata’s Trent Hypermarket and UK’s Vodafone deciding to raise its take to 100% in its Indian arm by investing $1.6 billion.

EY attributed the robust foreign inflows to easing regulatory environment and several steps aimed at boosting investor confidence.

The government announced liberalised the FDI policy to spur the economy and stem the rupee’s slide. FDI was allowed in 12 sectors. Foreign multi-brand retailers were sought out without any stifling conditions as long as they do not hold a majority stake in the Indian venture, EY said in a report.

So far so good. This year, foreign investment inflows would be determined by the global liquidity environment which, in turn, would depend on the US Fed tapering and how growth in India pans out, said Gupta.

FIIs bought equities worth over Rs 1.12 lakh crore in 2013

GSK invests Rs 4,800 crore to raise its stake in its Indian consumer healthcare arm

Unilever pumps in Rs 19,180 crore to up its stake in HUL

GSK decides to infuse Rs 6,389 crore for higher stake in its Indian pharma arm

Tesco to inject Rs 682 crore into Tata’s Trent Hypermarket for 50% stake

Vodafone to invest Rs 10,141 crore to fully own its India arm.

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