Evs Indian Economy Opportunities

Indian Economy Opportunities Unlimited

India: Fastest Growing Free Market Democracy

2

India: Among the Top-15 Countries in terms of GDP at constant prices India’s GDP witnessed high growth and was the second fastest growing GDP after China

The Indian economy has witnessed an unprecedented growth…. Booming Indian services and industry sector are providing the required impetus to the economic growth India's GDP: 2002-07 700 8.5%

600

8.4%

9.4%

7.5%

Fastest GDP growth of 9.4 percent in 2006-07, since last 18 years

500 400

Indian economy is the 4th largest in terms of PPP – USD 4.1 trillion in 2006

4% 300 USD Billion 424 200

484

534

2003-04

2004-05

590

631

2005-06

2006-07

100 0 2002-03

GDP at Constant Prices

The sound performance of each industry segment is leading to the overall robust performance of the Indian economy

3

Contribution of Services increased from 49 percent to 55 percent

700 600

155

500 400 300 USD Billion 200 100

104

109

103

91

205

223

116

319

168 117

347

0 1999-00 2002-03 2005-06 Services Agriculture Industry

2006-07

Growth in sectors (2006-07): Industry: 10.9% Services: 11% Agriculture: 2.7%

India: Robust Economic Platform India’s enhanced economic performance has been the major contributor towards increased Forex reserves Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability

4

India's Forex Reserves: 2001-07 (Till 22 June 2007) 250 199

200 152

141

150

213

…at present level of Forex reserves, the country has adequate cover for 12 months of imports

112

100 USD Billion54

75

50 0 2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08 (Till 22 June)

External Debt-to-GDP Ratio 22

Forex reserves witnessed an increase of 200 percent for the period 1990-2007

21.1

Falling Dollar inflates the India’s external debt

20.4

19

17.8

17.3 15.8

16 Ratio

Increased confidence of investors in Indian companies have led to a surge in cross border borrowing by the corporate houses

India’s Forex reserves are in excess of external debt…

16.4

…the decreasing external debt to GDP ratio indicates that India has a sound economic platform

13

10 2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

India: Surging Exports Services sector has been a major contributor to increased exports from India

Acceptance of Indian products along with the cost advantage has provided an edge to Indian companies

Indian companies have chalked out extensive plans to increase their presence abroad

Imports of products by India mainly includes petroleum products and minerals

5

India's Exports: 2002-07 (till February 2007) 120

103.42

100

112.40

83.81

80 60 40 USD Billion 20

52.81

63.95

Quality and cost advantage are the two important parameters leveraged by the Indian producers to increasingly market their products and services

0 2002-03

2003-04

2004-05

2005-06

2006-07 (upto Feb. 07)

India's Import: 2002-07 (till February 2007) 180 160 140 120 100 80 61.52 USD60 Billion 40 20 0 2002-03

149.65

162.30

111.89 78.28

Petroleum products are the major contributors towards India’s growing imports 2003-04

2004-05

2005-06

2006-07 (upto Feb. 07)

India: Attractive Investment Destination India is ranked second in AT Kearney FDI confidence index

6

With improved performance on PE ratio and ROE, Indian markets have attracted large investments FDI Inflow - India: 2001-07

18,000

15,730

16,000 14,000

Telecom and Electronics topped the list of inward FDI

Return on the Investments in India (2006 Q1) Market

FDI inflow for the period 2006-07 witnessed a growth of 180 percent over the same period last year

Mauritius has been the largest contributor towards FDI into India…..

180 percent Increase

12,000

PE Ratio

P/B Ratio

RoE (%)

10,000 8,000

USD 6,000 Million4,222

India

16.1

4.53

22

4,000

China

10.62

2.06

17

2,000

Indonesia

10.26

3.09

NA

Korea

9.85

1.84

16

Malaysia

13.21

1.82

16

Taiwan

12.17

2

11

Thailand

9.84

2.32

23

EM Asia

11.19

2.12

15

Latin America

9.35

2.46

18

EM Europe

10.9

2.39

15

5,546 3,134

2,634

2002-03

2003-04

3,755

0 2001-02

2004-05

2005-06

2006-07

Net FII into India: 2001-07 12 10.00

10

10.20

9.40

8

6.72

6 USD 4 Billion 2

1.80 0.60

0 2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

India: Vibrant Capital Market India is among the major destinations across the globe for inflow of US Dollar i.e. FIIs

Sensex risen 15 times in the period 1990-2007

7

Sensex – The Bombay stock exchange index has risen 15 times from 1990s to reach 15,000 mark in July 2007

7/9/2007 Crossed 15,000 mark

1/12/2007 Crossed 14,000 mark

16,000 14,000

FIIs augmented support by infusing large investments in Indian stock market

2/7/2006 Crossed 10,000 mark

12,000 10,000 INR

Emergence of industry and confidence of local investors along with the FIIs has led to increased movement of sensex

8,000

12/30/1999 Crossed 5,000 mark

6,000

Exorbitant industry performance

4,000 2,000 7/1/1997 7/1/1998 7/1/1999 7/1/2000 7/1/2001 7/1/2002 7/1/2003 7/1/2004 7/1/2005 7/1/2006 7/1/2007

Increased local investors’ confidence

India: Vibrant Economy Driving M&A Activities Growth Drivers:  Globalisation of competition  Concentration of companies to achieve economies of scale  Lower interest rates and vibrant global markets  Cash Reserves with Corporates Trends:  Ratio of the Size of acquisition to the size of acquirer has grown from 10 percent in 2004 to 25 percent in 2006.  Cross-border deals are growing faster than domestic deals  Private Equity (PE) houses have funded projects as well as made a few acquisitions in India

Number of Deals and Values 30

28.2 782

25 18.3

20 15

12.3

467

306

10 USD Billion 5 0

2004 2005 Deal Values

2006 No. of Deals

900 800 700 600 500 400 300 200 100 0

8

SECTOR

USD (Mn)

SECTOR

USD (Mn)

Automotive

518

Manufacturing

933

Banking and Financial

1,375

Media

630

Chemicals and Plastics

1,133

Oil & Gas

384

Electrical and

896

Pharma & biotech

2,520

Energy

1,484

Telecom

2,198

FMCG, Food and Beverages

1,327

Others

4,006

IT and ITES

2,903

Total

20,305

Electronics Number of deals

In 2006, there were a total of 480 M&A deals and 302 private equity deals… … Average deal size close to USD 36 million… …Contribution of private equity deals to total number of deals have increased from nearly 9 percent in 2004 to 28 percent in 2006

Major M&A Deals Undertaken Abroad by India Inc.

Tata Steel buys Corus Plc

USD 12.1 billion

Hindalco acquired Novelis Inc.

USD 6 billion

Essar Steel acquired Algoma Steel

USD 1.58 billion

Suzlon Energy Ltd. acquires REpower

USD 1.6 billion

Videocon Industries acquired Daewoo Electronics Corporation Limited

USD 730 million

9

Major M&A and Investments Announcements in India Vodafone buys Hutch

USD 11 billion

Plans to spend on its development operations in India over the next four years

USD 1.7 billion

Plans investment in private equity, real estate, and private wealth management

USD 1 billion

Aditya Birla Group increased its stake in Idea Cellular by acquiring 48.14-percent stake

USD 0.98 billion

Renault, Nissan and Mahindra & Mahindra has initiated a Greenfield automobile plant project in Chennai.

USD 0.905 billion

Mylan Laboratories acquired a majority stake in Matrix Laboratories

USD 0.74 billion

10

India: Pacing Ahead to Emerge as a Major Economy in the 11 World 2007 Global Retail Development Index (GRDI)

India has been ranked superior to other major countries by many prominent surveys…

AT Kearney placed India among the top three in its FDI confidence index…

India 80 60

India is expected to outperform its rivals in the BRIC, in terms of GDP growth rates, from 2015 onwards…

2.9

Malaysia

2.8

Brazil

20

Indonesia

0 Chile

3.2

China

Thailand

40 GRDI Score

India Russia Vietnam Ukraine China

… the retail market along with the services sector has been attracting the interest of major players

2007 Global Services Location Index

100

2.3 2.3 1.3

3.2 2.6

1.6

1.8

3.3

1.4 2

1.2

1.5 1.5

Financial structure Business environment

Latvia

1.4

1.1

People and skill availablity

Projected GDP Growth Rates for Select Upcoming Economies

8

6

4

2 Growth Rate (%) GDP

0 2005-10

2010-15

2015-20 Brazil

2020-25

2025-30 China

2030-35 India

2035-40 Russia

2040-45

2045-50

India: Astounding Demographics DEMOGRAPHIC TRANSFORMATION OF INDIA Annual Household Income (in USD)

Population (million)

Growth in the higher income categories of India’s population has created an affluent section of society, which has significant level of purchasing power

12

2

9

20

Rich (Above 115,000)

9

17

33

High Income (57,000 – 115,000)

48

74

120

Consuming class (23,000 – 57,000)

221

285

404

Working class (10,200 – 23,000)

726

710

613

Needy (Below 10,200)

2005-06

2001-02

2009-10(E) * In PPP terms

Increasing per capita income and large population moving into middle class has led to high level of consumerism in India

Per Capita Income

700

583

600

519

Increasing per capita income coupled with an emerging middle class has provided the necessary impetus to consumerism in India

461

500 400

651

393

USD 300 200 100 0 2002-03

2003-04

2004-05

2005-06

2006-07

India: Increasing Working Population

13

Growth in Global Working Age Population (15-64) Addition to Working Age Population by 2010

Stock Position 2005 World

4,168

India

691

Africa

500

China

934

South East Asia

362

Latin America

359

Southern Asia

132

USA

200

Europe

497

Japan

85

314 71 64 44 33 31 17 10 0 -3 -5

45

95

145

195

245

295

345

In Million

Countries worldwide are anticipating a shortage of working population in the future. India is expected to emerge as a clear winner, and by 2050, it will have the largest working age population.

Growth Expected in India

14

To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 trillion in the next five years

2010  GDP – USD 900 billion  GDP growth rate – 9%

2008  GDP – USD 750 billion  GDP growth rate – 9.5%

2006  GDP – USD 590 billion  GDP growth rate – 9 %  Services contribution – 54 %  FDI limit not 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc.  Balance of Trade – USD (-)46.2 billion  Investment goal – USD 250 billion

 Services contribution – 60 %  FDI limit is expected to be close to 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc.  Balance of Trade – Should increase with surging exports as compared with imports  Investment goal – USD 305 billion

 Services contribution – 60-65 %  FDI limit is expected to be 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc.  Balance of Trade – Should be positive with increased level of exports as compared with imports  Investment goal – USD 370 billion

Why India? – Quote Unquote India is among the three most attractive FDI destinations in the world.

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“India has evolved into one of the world's leading technology centers“.

India has among the highest returns on foreign investment.

Craig Barrett Intel Corporation A T Kearney FDI Confidence Index 2005

By 2032, India will be among the three largest economies in the world.

BRIC Report, Goldman Sachs

“We came to India for the costs, stayed for the quality and are now investing for innovation”.

“India is a developed country as far as intellectual capital is concerned”.

- Dan Scheinman, Cisco System Inc. as told to Business Week, August 2005 Jack Welch General Electric

US Department of Commerce

“The Indian market has two core advantages - an increasing presence of multinationals and an upswing in the IT exports”. Travyn Rhall, ACNielsen

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