Indian investments abroad remain flat in third quarter

Investment by Indian public and private limited companies abroad in joint ventures (JVs) and wholly owned subsidiaries (WOS) dropped marginally in the third quarter of FY09 to $7.4 billion compared with $7.89 billion in the corresponding period last year.

According to the latest data released by the Reserve Bank of India (RBI), the number of proposals cleared for investment abroad in JVs and WOS increased by 51.2 per cent to 828 as against 546 last year. During the quarter under review, the magnitude of investment proposals declined by six per cent. Only one proposal was cleared under the approval route as Gujarat State Petroleum Corporation (GSPC) got approval for their oil exploration project in Australia. Others were cleared through the automatic route.

The outward investment by the Indian entities were in the form of equities, loans and guarantees. These investments came from sources such as drawal of foreign exchange in India, capitalisation of exports, funds raised through external commercial borrowings, foreign currency convertible bonds, American depository receipts, global depository receipts and through leveraged buyouts by way of setting up of special purpose vehicles.

During the third quarter of 2008-09, the share of equity in total amount of investment proposals declined, while those of loans and guarantees showed a rise.

Equity accounted for 75.8 per cent of the proposal amount, followed by guarantees at 12.9 per cent and loans at 11.3 per centin the third quarter against 82.1 per cent in equity, 10.3 per cent guarantees and 7.6 per cent loans in the corresponding previous period.

Manufacturing accounted for 73 per cent of the proposals, followed by non-financial services at seven per cent and trading at 6 per cent. The rest comprised real estate development and construction, production and telecasting of tele series and oil exploration.

During the corresponding quarter of the previous year, 10 per cent of the proposals were in the manufacturing sector followed by non-financial services at seven per cent and trading at six per cent and the rest were others.

Within the manufacturing sector, investment proposals were in such areas as industrial lubricant, power generation, electrical equipment and construction.

In the trading segment, investment proposals were in sectors such as pharmaceutical formulation and healthcare products while proposals in non-financial services included software development services and textiles.

The Netherlands, the UK and Singapore together accounted for 73 per cent of the amount of proposals for outward investment as against Singapore, Mauritius and the US accounting for 72 per cent of the proposals last year.