IDEA News & Updates April 2004 (Spotlight Opportunities & Strategies - Gujarat 2004)
1. BPO boom: CNBC reports that Gujarat is likely to be catch up as a second generation destination in the BPO boom in India. The identified area is the financial services sector as Gujarat has trained manpower in the accountancy profession. Apart from financial services, a leading Gujarat based public sector company is interested in entering the BPO market in the energy sector. Apart from this a leading investment banking firm in Mumbai has posed an acquisition opportunity in Gurgoan via IDEA’s network to the investor. Acquisition route is considered a quick way to gain track record required for BPO services work which is an essential prerequisite in such business. Incidentally Pune is likely to do a business of $ 1 billion in BPO this year and already done a business of $ 600 million last year, so there is a potential to catch up in Gujarat with good infrastructure available. Any inquires maybe forwarded and taken up with the concerned stakeholders such as BPO service providers and IT Parks.
2. Food & Agro : A trade inquiry was received from IDEA’s associate in Chandigarh for import of tysons chickpeas from Australia & Whole wheat mugs from Karachi and export of safflower seeds to Europe ( 30 containers a month) Further acquisition opportunities in Food & Agro sector such as cashew processing (Maharashtra), edible oil & biscuits seems to be in the market. Gujarat is focusing on agro commodities such as groundnut, castor , sesame, rapeseed & Mustard, cumin, fennel, Isabgol, ( psylum husk) , garlic, tobacco, banana, cotton, mango, onions, potato, chiku, guava, papaya, sugar. It has a few major traders in this business apart from the milk cooperative giant Amul. Incidentally a commodity exchanged was launched in India earlier this year and commodities are one of the most interesting sectors globally for portfolio investors at present. In Gujarat commodities can emerge as a focus for direct investment promotion and trade efforts. The present economic boom in India, with first quarter growth rate in excess of China has much to do with a good monsoon. In Gujarat much can be done to attract commodity players in view of improved irrigation in the post Narmada era. (estimated at 1.8 million hectares land, 75% of which is drought prone resulting in an incremental production of > 350 million $’s per annum. Of this 45,000 ha. would be available this year itself) The project would also increase the inland water mass area in Gujarat by ten times and their is good potential for fishing and aquaculture. Any inquiry for investment or trade in the food & agro sector maybe forwarded to the leading traders or investment bankers operating in the sector.
3. Pharma : A few Gujarat based companies are amongst the top ten pharmaceuticals majors in India and growing at double digits growth rates. Some of the opportunities include:
acquisitions in US & Europe of companies in generic with US FDA's approvals.
Interest in acquiring Biotech facilities in US or Europe to gain expertise.
contract manufacturing of generics and biotech products and processes
distribute products of MNC's in India in segments including lifestyle drugs i.e. cardiovascular, neurology & diabetes to prepare for post 2005 patent era’.
Post early stage contract research for research and development, clinical trials etc.
distribution of critical care products or medical devices in India.
Early state contract research or cooperation in cell biology such as stem cell
IDEA has been receiving interesting inquires from its Euro focused network partners. Legal assistance is available for registration or strategic cooperation in Australia; trade in Africa, Middle east & China. Any leads for pharma deals or tie ups with focused Pharma investment banking firms are invited to explore this booming sector of the Indian economy.
4. Ports : Gujarat being twice lucky in attracting global majors such as Maersks and P&O in private container port development and is looking to get third time lucky at a new site in the Southern Coast of Gujarat . An investment of around $ 200- 300 million is envisioned in the first phase in partnership with a leading MNC company. IDEA, along with its port focused consortium partners, is willing to assist investors in evaluating the feasibility, due diligence for the opportunity under a suitable confidentiality agreement & success fee based mandate. Interested investors may send their credentials for a name clearance.
5. Chemicals : Gujarat has been a traditional leader in the chemical sector in India. One of the leading Gujarat based companies in the business of plastic / petrochemical products for building construction is looking to diversify horizontally or vertically in chemicals business including licensing new technologies, biotech, synthetic textiles etc. India's largest private sector company which is based in Gujarat has prepared a list of down stream application projects from its petrochemicals complex in Gujarat. A number of refinery based aromatic projects have been also identified. Interested investors may forward their inquiries
6. Oil & Gas: Gujarat is one of the major producers of oil and gas in India and hosts no. of Onshore and offshore oil & gas blocks. There is also potential to exploit coal bed methane (CBM). Traditionally the blocks are awarded by the Director General of Hydrocarbons, Govt.of India but the sector has been quite vibrant with M & A and financing tie ups. Any farm in, farm out or financing opportunities may be forwarded to the active investors or investment financing agencies operating in this sector.
7. Gas distribution: Gujarat is a leader in this sector with India’s first two LNG terminals a common carrier gas pipeline, related , power and city distribution gas projects. A leading public sector company has acquired rights to market LNG in Gujarat and to set up city gas distribution networks in North Gujarat. A recent Supreme court has ruled that gas would not be regulated at the state level effectively deregulating the sector. In such a scenario first mover often gains a natural monopoly and tie ups with such players is a possibility for investors. Any inquiries maybe forwarded to the companies operating in this sector.
8. Power: While the IPP story has left many initial scar’s, the possibility of power trading & restructuring of existing units as user companies under the Electricity Act 2003 has given rise to a new hope for reviving this sector which is a building block in direct investment activity. IDEA along with E3 Foundation is working to revitalize the sector by assisting companies to reach financing solutions or re-structuring off take agreements and monitoring over a dozen power projects. Any inquires for EPC with financing tied in or power trading maybe forwarded.
9. SEZ’s: SEZ are being promoted in Gujarat to provide a hassle free environment for export production free of all taxes and duties including Income tax benefits till 2010. An SEZ in one of the fastest growing cities of Gujarat is looking for a co developer. An another SEZ is being developed as a downstream petrochemicals hub by India's most profitable public sector entity is also looking for a co-developer. IDEA is also assisting SEZ's to look for anchor investors and to tie ups with locational consultants across the world. Any inquiries maybe forwarded.
10. Minerals : An SME player is looking for investors in a marble & granite lease either on sublease or on profit sharing basis. Gujarat also has suitable reserves to plan a alumina and metcoke project in Kutch which is a shortage commodity at present. Any inquiries may be forwarded.
11. Asset reconstruction (1) IT Hardware: a Gujarat based company that had earlier diversified into IT is keen to sell hardware assets such as Tran receivers, satellites & antenna’s. (2) 4 leading public sector banks have come together to create an asset reconstruction company in India with an initial assets transferred of USD 2.0 billions. Any inquiries to search specific assets may be forwarded.
12.Canada : IDEA met with a newly constituted Indo Canadian Chamber of Commerce focusing on Gujarat to identify area of cooperation. Some of these include Pharma , Energy such as CNG conversion, Telecom, Food & Agro "commodity" business , Integrating Indian companies in the recycling value chain. Earlier last yr. IDEA had received an opportunity form the Canadian commercial consulate for master franchises of a major retail coffee chain. Any inquires for cooperation with Canada are invited.
13. Japan : IDEA is working with a leading Sogo Shosha (general trading company of Japan) in facilitating Indo Japanese cooperation in Gujarat for development of projects. Around nine projects have been identified in area’s such as Railway link , Large economic benefit hydro power & irrigation projects, Cold Chain Project:, Metcoke Project: , Power Projects, Trading: Chemicals e.g. import of Sulphur , food & agro products, Pharma: Petrochemicals, Ports, Ship breaking breaking & dismantling technology to name a few. Any inquiries for cooperation with Japan are invited.
14. Africa : GCCI is an apex agency of over 3000 members from investment & trade community in Gujarat. GCCI is focusing on creating investment & trade links in Africa. The areas of focus include East Africa i.e. Uganda, Kenya & Tanzania. GCCI is also reviewing investment opportunities as laid out in a new report published by MIGA Swiss Partnership “ Shedding a new light on Africa.” that focus on Sub Saharan Africa. GCCI has invited the ambassadors of these countries in May and would like to tie up with investment & trade promotion agencies in Africa for mutual cooperation and ties. IDEA is assisting GCCI in developing its strategy for Africa. Any inquiries for cooperation with Africa are invited.
15. Middle East: Another natural ally for Gujarat is the middle east with closet possible distance to the Western Coast of India including Gujarat is looking to cooperate with middle east in areas such as patient tourism, SEZ’s & real estate investment, energy cooperation and trade. Jumping from the fourth place to the third place in 1999, the UAE real estate and construction sector stirred by the huge property projects initiated by both Government and private sector, has pushed its way towards the first position among the other countries investing more than $25 billion in 2001-2003. As a whole surveys have indicated that the Middle East region is likely to receive over $ 150 Billion in next few years. GCCI had hosted a conference on cooperation with Middle east. Any inquiries for cooperation with Middle East are invited.
16. Kerala: Kerala is a coastal state in Western India. It is also trying to have a gas based economy with announcements of an LNG terminal & power projects. Kerala is also a leader in biodiversity business such as eco tourism and natural medicine. A leading development agency of govt. of Kerala is looking for a strategic partner to develop for coastal locations. The possibilities to attract industries includes ayurvedic parks, education parks, gas based power projects, etc. Any interest maybe forwarded to the agency in Kerela.
17. Financing : Coincidently in the post Sep.11 period much of the focus in Indian corporate lending has been on restructuring rather than on financing new growth. However, there seems to be a turn around in corporate investment trends in the last few months.
A leading public sector bank in India with around, $ 5 billion invested in infrastructure, is looking to galvanize its corporate account activity in Gujarat. It is looking at long term or short term financing opportunities in the plus 25 cr bracket. ( $ 5 million) IDEA has been strategically cooperating with vertically focused developmental financing agencies in sectors such as oil and gas, infrastructure, health and education, SMEs to develop an alternate supplementary capital source in India. With this move, IDEA would like to bring to the table best practices in international developmental financing institutions to main stream of Indian banks. Any proposals maybe forwarded to the bank.
18. Trade: GCCI is creating a website www.buygujarat.com that highlights over 400 companies. The same would be supported by offline expertise for which capacity building exercise is being undertaken in cooperation with IDEA. Inquires have been received for trade in pharmaceuticals, edible oil etc. and are invited.
19. IPO : The divestment drive of central govt. Puss's with operations in Gujarat such as ONGC & IPCL met with overwhelming success and attracted big ticket FII’s from across the world including $ 80 million allotted to a leading insurance co. in Singapore.
A Greenfield PSU promoted LNG project in Gujarat also successfully came out with an IPO. IDEA would be willing to assist institutional investors make private equity placements possibly as pre IPO placements and monitoring companies in the energy & petrochemicals space.
20. Private equity or Venture Capital : India is once again beginning to look as an attractive destination for such investors. In private equity the constraint has been on the supply side with traditional companies, other than the new IT entrants, being extremely conservative in inducting such investors. However opportunities could exists in companies in the pre IPO stage or where inducting strategic investors is the part of the business plan. SME Venture capital funds are also gearing up to be in investment mode again after having been in a consolidation phase for a long period. Any inquiries for investment may be taken up on a best effort basis.
21. Environment incentives: An institute of the Japanese govt. along with a "not for profit agency" in New Delhi hosted a seminar in Gujarat to create awareness on CDM projects after the Kyoto Protocol is enforced. The areas’ of focus included renewable energy, bio fuels etc and any project that is lower than the baseline emissions and whose economics can be pushed over the margin with CDM benefits would be eligible to earn Carbon credits in the first period of negotiations from 2008- 2012. For Gujarat one possibility to be explored include LNG, LNG based power projects, tail end gas transmission & distribution projects, CNG retailing, environmentally benign metcoke projects etc. As such it was felt in the seminar that much work has to be done in resolving the international issues laid out in the Kyoto protocol before investors in emerging markets can venture into new technologies under the CDM mechanism. Buyers of Carbon credits may explore possibilities to obtain carbon rights for projects along with their willingness to invest in the equity of such projects as an expression of seriousness.
22. Political Risk Insurance: India is an advanced economy which maybe out of the ambit of political risk insurance such as expropriation or foreign exchange repatriation. However in certain sectors such power, media & telecom regulatory frameworks are undertaking major changes with new regulatory regimes falling into place. This may create a need for an advanced case of breach of contract insurance. Political tensions have also reduced significantly but FDI investors who wish to obtain cover for war & civil disturbances in sensitive sectors such as energy & infrastructure would be able to obtain such cover. Any inquires maybe sent to political risk agencies operating in India.
23. IPA study. IDEA was interviewed by an ongoing Oxford Investment Study collaborating with the business school of Oxford University as one of the youngest investment promotion initiatives. IDEA explained it is micro level investment promotion network operating the state of Gujarat focusing on matured investment opportunities & tie ups. It is an umbrella agency formed on the basis of cooperation of a high level network of eminent individuals, investment promotion agencies & investment banking firms and closely monitors a universe of project opportunities of over $ 20 billion. It is working closely with the state govt. & chamber of commerce & being corporatized as a not for profit company. IDEA understands investment promotion is a high stakes game and is creating capacity to meet this very fundamental requirement. Any serious investor can benefit from use of IDEA’s “ do good” network on a success fee based "beneficiary's mandate." Typically the beneficiary's are existing stakeholders but incase control is handed over in a joint venture or govt. bid out project it can be an "investor mandate." IDEA has tie up's with a number of professional services firm's to assist any Greenfield project or any deal in Western India
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India Development & Environment Agency,
IDEA, a new investment promotion initiative
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