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India: hidden jewel - Chris Grove
The Indian economy has been one of the most resilient during the various crises that have affected global markets over the last decade. As a result, India now ranks as the 4th largest economy (on PPP terms) after the US, Japan and China. There can be no doubt that India has now arrived on the world stage and the other global economies ignore it at their peril.
In recent years, Indian business houses have increasingly been flexing their muscles in Europe. Some of the largest M&A / flotations in the European region have involved India in some context. Major India corporates have been increasingly active in the UK and names such as Tata, Mahindra, Godrej, Vedanta and Birla are becoming well known. There are also a host of small to medium sized companies which have been making their mark in sectors ranging from food to hi-tech both at home and abroad.
Graph of all deals in India from calendar year 2004 to 2010: (source – Venture Intelligence)
The number of outbound deals has been consistently higher than inbound deals. Even during the 2009 global crisis, Indian companies continued to acquire globally. More than 80% of the deals are what we would regard as small and medium sized transactions, reflecting the business landscape in India, which is defined by SME’s and entrepreneurs, many of whom have global ambitions.
Building on this strong entrepreneurial platform, I think that the next 10 years will be interesting for India and Indian businesses. This optimism is based on a number of things:
- Growing affluence of Indians abroad (NRI);
- Annual domestic savings in excess of 35% of GDP;
- Well structured financial / capital markets; and a
- Legal environment which is conducive to a capitalist economic model and rewarding risk takers.
Domestic Indian businesses are ambitious for opportunities to expand on the international markets and as the market opens up there will be some big winners. Private equity has been targeting India for some time, recognising the size of the potential opportunity.
Given the obvious cultural challenges, doing business with India is not straightforward and a deep knowledge of the Indian psyche is recommended. Getting appropriate advice from experts who understand the challenges as well as the potential rewards, will ensure that the risks are minimised.
At BDO, we have a dedicated Indian desk in the UK, supported by one of the larger full service accountancy firms in India, with national coverage.
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