Investment Opportunities in India

October 22, 2012

Infrastructure: The best investment sector in India

Infrastructural development mirrors the overall health of a nation’s economy. Physical infrastructure is directly proportionate to the growth and development of a country. The infrastructure sector in India comprising of roads and urban development, airports, energy, shipping and ports, and electricity has become a key driver of the Indian economy over the last five years.

The Government of India has always been quite forthcoming when it comes to the upgradation of infrastructure. There has been a strong focus on assuring effective implementation of associated projects though budgetary allocations, tariff policies, fiscal incentives, private investment sector participation and public-private partnerships (PPPs).

Infrastructure Development Finance Co (IDFC) Ltd has estimated that India’s spending on infrastructure is 8 per cent of the gross domestic product (GDP) as of March 2011 and it needs to be increased further to over 10 per cent of GDP by 2017 to sustain the growth targets.

Infrastructure sector in India is poised for a big leap and offers significant investment opportunities for US businesses and other investors.

Investment Opportunities for Non-Resident Indians (NRIs)/Person of Indian Origin (PIOs) in Indian Infrastructure

Global private equity (PE) funds looking for high return on investments are going to target Indian infrastructure companies in the coming years, says a report by research agency Preqin. As per the study, India is attracting the highest number of unlisted, closed-end funds that focus on a single country, making it the most preferred choice among emerging investment sectors in India.

Infrastructure PE funds investing in India can choose from sub-sectors such as power, telecom, roads and ports. The Preqin report says 74 per cent of India-focused funds will invest in greenfield projects, 84 per cent in brownfield assets, and 42 per cent will buy out the stakes of other PE funds.

India’s infrastructure sector will approximately entail an investment of US$ 1 trillion over the next five years, according to a report ‘Real Estate and Construction Professionals in India by 2020´ by realty consultant Jones Lang LaSalle. This includes work on the ambitious 7-phase National Highway Development Project (NHDP), India’s largest road project ever. Phase II, III and IV are under implementation. The Government through the National Highways Authority of India (NHAI) is using a variety of contractual structures in moving towards PPP in roads projects.

Investment opportunities for NRIs/PIOs exist in a range of projects being tendered by NHAI for implementing the remaining phases of the NHDP – contracts are for construction or Built-Operate-Transfer basis depending on the section being tendered. Over US$76 billion investment is required over the next 5 years to improve road infrastructure and Road sector investments expected to grow at 19 per cent per annum.

It is also estimated that about 97 million jobs would be created over 2012-22 across different investment sectors in the country due to which, India would potentially need to build an average of 8.7 billion square feet (sqft) of real estate space every year, as per a report by prepared for Royal Institution of Chartered Surveyors (RICS). This would be a great attraction for NRIs/PIOs looking for opportunities to invest in the infrastructure segment.


October 4, 2012

Why should NRIs and PIOs invest in Indian Aviation sector?

Infrastructure sector, not only is the backbone of an economy, but also plays a vital role in India’s social and cultural segments. It contributes significantly to the growth of gross domestic product (GDP), while creating opportunities for employment and investment.

Infrastructure in India will require US$ 1.7 trillion investment in the next 10-years, according to investment banking company Goldman Sachs. With a view to streamlining and simplifying the appraisal and approval process for public private partnership (PPP) projects, a Public Private Partnership Appraisal Committee (PPPAC) has been constituted under the chairmanship of Secretary, Department of Economic Affairs and Secretaries of Planning Commission, Department of Expenditure, Department of Legal Affairs and the concerned Administrative Department as its members.

Global private equity (PE) funds looking for high return on investments are going to target Indian infrastructure companies in the coming years, says a report by research agency Preqin. The Preqin report says 74 per cent of India-focused funds will invest in greenfield projects, 84 per cent in brownfield assets, and 42 per cent will buy out the stakes of other PE funds.

Major sections pertaining to infrastructure in India include roads, ports, aviation, energy and railways.

Aviation in India

The aviation industry in India is one of the major economic drivers for prosperity, development and employment in the country. The rapidly expanding aviation sector in India handles about 2.5 billion passengers across the world in a year; moves 45 million tonnes (MT) of cargo through 920 airlines, using 4,200 airports and deploys 27,000 aircraft. Today, 87 foreign airlines fly to and from India and five Indian carriers fly to and fro from 40 countries.

India is the 9th largest aviation market in the world as per a report, Indian Aerospace Industry Analysis, published by research firm RNCOS. The Indian Aviation sector grew around 13.6 per cent year-on-year in FY 2010, which was amongst the highest globally.

India is expected to be amongst the top five nations in the world in the next 10 years in the aviation sector. On the sidelines of the International Civil Aviation Negotiation (ICAN) Conference, Ms Pratibha Patel, former President of India, highlighted that currently, India is the ninth largest civil aviation market in the world.

Latest Developments in Indian Aviation Sector

  • The Bengaluru International Airport, along with Chatrapati Shivaji International Airport, Mumbai, has been presented with certificates in recognition of their achievements under the various levels of Airport Carbon Accreditation by Airports Council International (ACI). Bengaluru airport, which is the busiest in South India, has been given a certificate for carbon reduction. Mumbai airport on the other hand has been awarded the certificate for mapping carbon emissions
  • The first ‘Made in India’ helicopter cabin is ready to take off in global skies. The cabin has been manufactured by the Tata Group in Hyderabad and has been fitted in the helicopters by the US-based firm Sikorsky. In India, Sikorsky has so far supplied six ‘executive transport’ category helicopters to some of the commercial establishments in Mumbai
  • The Government of India has allowed 100 per cent foreign direct investment (FDI) for green field airports, via the automatic route. Moreover, foreign investment up to 74 per cent is permissible through direct approvals while special permissions are required for 100 per cent investment

The aviation industry in India is exploring opportunities to improve connectivity and is also looking at enhancing the number of Indian carriers to various countries. Massive investments in airport infrastructure have led to world class airports which have become the symbol of India’s growth story.

August 29, 2012

Scenario of Power Sector in India

Infrastructure refers to all those services and facilities that constitute the basic support system of an economy. The development of an adequate infrastructure is essential for sustainable growth of the Indian economy. Power is one of the most important components of infrastructure that affects economic growth and well-being of nations.

India is the fifth largest electricity producing nation in the world. Power generation has grown over 100 fold since independence. The total installed capacity in India is above 1, 50,000 MW, of which majority of capabilities is with public sector companies. Only 15 per cent capacity is from the private sector, though this is now starting to increase.

The power sector is normally divided into three sub-systems:

Generation: It is done at power plants or stations that convert some form of mechanical, chemical, or nuclear energy into electrical energy.

Transmission: It is the process of transferring the generated power to a distribution system.

Distribution: It is the final stage in the delivery of electricity to end users. It involves providing the transmitted power to individual homes, commercial areas, etc.

Growth and Performance

The Indian Ministry of Power has set a goal, “Mission 2012: Power for all”. Along with providing cent per cent access to electricity, the main aim is to provide reliable and good quality power to enhance commercial feasibility.

Due to rapid urbanisation and industrialisation, there is a huge demand for power in India. This creates enormous opportunities for private players because of high energy shortage. Government is inviting private investment in power infrastructure in India by providing various incentives to set up power plants, according to research report of Indian Power Sector Analysis.

A massive capital investment of around US$ 200 billion is required to meet Mission 2012 targets. The Indian electricity sector, will add nearly 45,000 megawatt (MW) to its total installed capacity by 2013-14, to the existing production, according to a RNCOS research report. This has welcomed several global companies to establish their operations in India under the public-private partnership programs.

Investment Policy

Government of India has initiated several reform measures to create a favourable environment for investment in the country. Some of the measures are:

  • There is no requirement of licenses to set up new power plants in India. According to the Ministry of Power, 100 per cent FDI is permitted in generation, transmission and distribution system of power sector in India.
  • Indian Government provides income tax holiday for a block of 10 years in the first 15 years of operation and waiver of capital goods’ import duties on mega power projects (above 1,000 MW generation capacities).
  • Power procurement is permitted through a transparent bidding process. There is no customs duty on the import of capital goods for mega power projects.
  • The Government of India has also constituted independent regulatory commissions in 22 states, so that each State has its own electricity regulatory commission. Distribution reforms have been initiated with distribution being privatised in few states like Mumbai, Orissa and Delhi.

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