Public RelationsSlowdown hits India Inc's overseas investments
Outflows fell 16.4 per cent in April-Sept 2009 compared to the year-ago period.
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The slowdown in global economy and recession in advanced countries have hit overseas direct investments by Indian companies for most part of 2009.
India Inc’s overseas investments — equity and debt — declined by 16.4 per cent to $5.8 billion (around Rs 26,000 crore) in April-September 2009 from $6.9 billion (around Rs 31,000 crore) in the same period in 2008, according to Reserve Bank of India (RBI) data.
Bankers said economic stress and a sharp drop in demand after the financial crisis forced Indian companies to go slow or keep overseas expansion plans on hold. They have been active in acquiring companies abroad from 2005 till the middle of 2008.
TAKING A KNOCK
India’s outward direct investment flows
April-September
2008
2009*
Equity
5,438
3,880
Debt
1,441
1,848
Guarantees invoked
–
22
Total
6,879
5,750
* Provisional; figures in $mn
Source: RBI
In April-September 2009, the share of equity went down in outward investments with the amount of equity flow showing a negative growth of 28.6 per cent, RBI said.
Actual outward foreign direct investment (FDI) in joint ventures and wholly owned subsidiaries during the July-September 2009 period stood at $3.3 billion, showing a decline of 7.3 per cent over $3.5 billion during the corresponding quarter of the previous year.
Equity investments were down 31.3 per cent, while loans showed a growth of 90.2 per cent. Of the total investment amount, 60 per cent was in the form of equity and the remaining 40 per cent was in loans.
There was no invocation of guarantee during the period. During July-September 2008, 80 per cent of outflows were in the form of equity and the rest in loans, while there was no invocation of guarantee. Thus, during the quarter under review, the share of equity in actual outward FDI has decreased significantly. Still, equity continued to be the dominant mode of financing.
During July-September 2009, the proportion of “actual investment outflows” to “cleared investment proposals” increased to 68 per cent from 63 per cent a year ago. This perhaps indicates the beginning of upturn as economic condition showed some improvement. But the global recovery remained fragile and companies were moving cautiously ahead with business plans, bankers added.