Daiichi, Ricoh and Docomo. Bitter experiences of these three Japanese firms in their Indian ventures are holding back fresh investments into India from a country known for its exemplary entrepreneurship and technological prowess.

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While the first two firms have been the victims of unethical practices and frauds in their Indian arms, respectively, Docomo had to part ways from their partner Tatas over poor performance of their telecom JV, triggering a messy separation process.

"A lot has come from some of the large Japanese investments which have turned into a failure, for example Tata-Docomo deal, the Daiichi deal and also, the recent Ricoh deal. The issues were highlighted by Japanese media in a way creating an image that decision making is very complex in India for Japanese investors. They don't know how to navigate the (Indian) market," Akinori Niimi, chief executive officer, ACA Investments Japan, told DNA Money.

High valuation and crowding of investors, including deep pocketed US-based funds, are some of the other factors keeping out Japanese investors, he said.

Kazushige Kobayashi, managing director of CapitalDynamics's Asia headquarter, said cultural differences are the reason why Japanese funds, except perhaps SoftBank, are not looking at India in a big way.

"I see it more as a cultural problem. Corporate cultures are very different in these two countries. But I do see more Japanese money coming into India in coming days," he said at the sidelines of Horasis Asia Conference.

Kobayashi, who heads the Asian investments from the Tokyo office of Zurich-based private equity player, sees success of Maruti Suzuki as a catalyst to bring in Japanese money despite disappointments faced in the three cases cited above.

According to the research firm Venture Intelligence, while investments by Japanese firms as private equity touched $1.43 billion in the first half of calendar 2017, from just $459 million in 2016, almost the whole of it or about 98.9% was accounted by SoftBank Group Corp which invested $1.40 billion.

Japanese drugmaker Daiichi Sankyo bought Ranbaxy Laboratories in 2008 from Shivinder and Malvinder Singh but found out that critical information concerning US drug administration investigations were concealed and misrepresented.

In 2014, Daiichi exited Ranbaxy by selling it to Sun Pharma.

Ricoh, Japanese digital imaging equipment maker, has suffered a fraud arising out of falsification of accounts, estimated at about Rs 1,123 crore, following which Indian arm's top officials were removed.

The parting of ways between the Tatas and Docomo from their telecom joint venture is not similar to the above cases but was a bitter experience for the Japanese investor and a lesson for it about doing business in India, a probable case of "cultural differences" that Kobayashi alluded to.

Apart from SoftBank, smaller Japanese investors like Beenext having exposure in Shopclues and Rebright Partners.

LIGHT AT END OF THE TUNNEL

  • More Japanese money will flow into India in the coming days, according to experts  
  • Successes of Maruti Suzuki is a catalyst to bring in Japanese money despite disappointments earlier