FDI inflows in the services sector rose by about 26% to $8.68 billion in 2016- 17 with the government taking steps to improve ease of doing business and attracting foreign investments.
The services sector, which includes banking, insurance, outsourcing, research and development, courier and technology testing, had received foreign direct investment (FDI) worth $6.89 billion in 2015-16, according to data of the Department of Industrial Policy and Promotion (DIPP).
The government has taken several measures such as fixing timeliness for approvals and streamlining procedures to improve ease of doing business in the country and attract foreign investments.
With FDI growth in key sectors like services and telecom, the overall foreign investment inflows in the country too increased by 9% to $43.5 billion last fiscal.
Increasing FDI inflows in the services sector assumes significance as it contributes over 60% to India’s gross domestic product. The sector accounts for about 18% of the total FDI India received between April 2000 and March 2017, followed by key sectors such as computer software & hardware, construction development and telecommunications.
To further boost FDI inflows in the sector, the government is considering relaxation of policy in areas like single brand retail, multi-brand retail, print media and construction. The government is also focusing on enhancing services exports. It is organizing global services exhibition besides the commerce and industry ministry is looking at relax norms in areas like higher education to attract foreign players.
Foreign investments are considered crucial for India, which needs around $1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth. A strong inflow of foreign investments helps improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.
Nina Vaskunlahti, Ambassador of Finland to India Paul Noronha
India is becoming one of the favorite destinations for investments in manufacturing, clean tech, infrastructure and hi-tech for Finnish companies.
Nina Vaskunlahti, Ambassador of Finland to India, in an interview with BusinessLine said, “There is increasing interest in economic cooperation, and Finnish companies are looking for new opportunities in India.”
Investment protection
According to Vaskunlahti, although India’s legislative framework can be a little complicated and the judicial system overworked and under-resourced leading to delays in solving disputes for foreign investors, overall the atmosphere is “welcoming and pretty open”.
However, according to the Ambassador, Finland is worried over India’s move to terminate investment protection agreement with 82 countries. “We are not quite sure what is the purpose of this,” Vaskunlahti said. While the treaty between India and Finland is still in force, according to Vaskunlahti, India and the European Union seem to be stuck over negotiating a new investment protection treaty after a year back India had sent request for renegotiation for the Bilateral Investment Treaty (BIT) to over 80 countries with whom it had earlier signed Bilateral Investment Promotion and Protection Agreements (BIPA).
“As a member of EU, we cannot negotiate on our own, because it’s the EU Commission that has a negotiating mandate,” Vaskunlahti said. “What we have now on the table is called a comprehensive negotiating mandate which covers both free trade agreement and the investment protection agreement. For the moment, nothing much is happening, but efforts and work are being done in background to push it forward.”
The new model of the BIT was cleared by the Union Cabinet in December 2015 and was seen to give more stability to foreign investors and prevent disputes with multinational companies by excluding matters such as government procurement, taxation, subsidies, compulsory licences and national security.
Arbitration mechanism
At the same time, the new model BIT brings in a provision obliging foreign investors to first exhaust the option of local judicial system at least for five years before going to international arbitration mechanism in case of disputes.
Some of the cases when foreign investors challenged India in international arbitrage, invoking clauses of earlier BIPAs include Devas Multimedia, Vodafone, Deutsche Telekom, Sistema and Cairn.
The bull run was driven by hopes of earnings growth and continued buying by domestic investors. Rising global optimism on French elections results and likely announcement of tax reforms by Donald Trump in the US also pushed the markets higher.
With mixed positive sentiments among investors and unabated funds inflows in both global and domestic rallies, markets created yet another milestone in the stock trading history on Wednesday. The benchmark Sensex ended with new and all-time high of 30,133.35 for the first time, while the broader Nifty scaled a new peak at 9,351.85 points.
Similarly, energised by positive global cues in line with a spectacular rally in equities, the rupee also surged by another 15 paise to close near a fresh 21-month high of 64.11, the third straight session of gains. This is the highest closing for the rupee since August 10, 2015, when it had ended at 63.87.
The market momentum also got an additional push on growing expectations for robust foreign inflows to India sparked by a renewed optimism about the US economy and waning anxiety over the European political landscape. Besides, stocks also saw frenzied buying, in line with global shares, which have been on a high after the first round victory of centrist Emmanuel Macron in French presidential elections. Investors are also keeping an eye on US President Donald Trump’s much-awaited tax reforms.
However, traders and market insiders have a different view on this unusual rally, saying that the impressive show by the ruling BJP in Delhi civic polls added to the positivity in the share market.
Keeping the upward trend of the markets, the BSE, however, cautioned the investors not to be carried away by the ‘euphoria’ and refrain from investing in penny stocks. BSE Chief Executive Ashish Chauhan appealed to investors to invest only in good companies or opt for the mutual funds’ route to invest in the markets. “As an exchange, we advice investors not to be carried by the 30,000 mark euphoria and they should not invest in penny stocks nor do they fall prey to fly-by- night operators,” Chauhan said after celebrating the milestone at the Dalal Street towards the end of the trading hours in Mumbai.
As far as Sensex is concerned, the BSE 30-share index opened on a strong footing and surged to a lifetime high of 30,167.09 points in intra-day trade, before settling at 30,133.35, up 190.11 points, or 0.63 per cent. This surpassed its previous record close of 29,974.24, reached on April 5. The gauge had hit its previous intra-day high of 30,024.74 on March 4, 2015. The Sensex has gained 768.05 points or 2.62 per cent in three days.
Similarly, the broader 50-issue NSE Nifty scaled a new high of 9,367 before finally settling 45.25 points, or 0.49 per cent higher at 9,351.85, a new record closing.
Its previous closing high of 9,306.60 was hit in Tuesday’s trade. It also broke the previous intra-day record of 9,309.20. “Market has made a higher high on account of rising global optimism due to ease in political risk in Eurozone and expectation of tax reform in the US. “Volatility emerged during the late hours due to profit booking but short covering ahead the expiry navigated the direction back to north. Optimism on earnings and continued buying by local investors is directing the recent rally in the market,” said Vinod Nair, Head of Research, Geojit Financial Services.
Overseas, Asian indices also ended higher following overnight rally in US stocks on strong earnings announcements and expectations surrounding US President Donald Trump’s impending tax reforms. Tokyo’s Nikkei ended up 1.1 per cent, while Hong Kong’s Hang Seng rose 0.5 per cent, its fifth straight day of gains. Shanghai Composite Index edged up 0.2 per cent.
Key indices in Europe, however, were mixed in their morning deals, with Paris CAC 40 rising 0.1 per cent, London’s FTSE slipping 0.06 per cent and Frankfurt’s DAX 30 declining 0.03 per cent. Back home, of the 30-share Sensex pack, 18 scrips ended higher while 12 closed lower.
Major gainers were ITC 3.36 per cent, M&M 3.29 per cent, HDFC 2.36 per cent, HUL 1.78 per cent, ICICI Bank 1.61 per cent, Tata Motors 1.17 per cent, Bharti Airtel 1.14 per cent, Maruti 0.88 per cent, HDFC Bank 0.73 per cent and Asian Paints 0.73 per cent.
The total turnover on BSE amounted to Rs 5,021.73 crore, higher than Rs 4,006.89 crore registered during the previous trading session.
Home service startup UrbanClap has raised Rs.20 Crore of debt funding from California-Based Trifecta Capital through Non-Convertible Debentures.
A Non – Convertible debenture or NCD do not have the option of conversion into shares and on maturity, the principal amount along with accumulated interest is paid to the holder of the instrument. There are two types of NCDs-secured and unsecured.
Previously, UrbanClap raised an undisclosed amount funding from Ratan TATA in December 2015. The total equity funding from UrbanClap is about $36.6 Millions. The startup investors base include SAIF Capitals, Rohit Bhansal, Accel Partners, Bessemer Venture Capital and others.
The startup has also acquired similar startups like GoodServices and Mumbai-Based HandyHome.
The Delhi-Based startup was founded in October 2014 by Varun Khaitan, Raghav Chandra and Abhiraj Bhal. UrbanClap is the simplest way to hire trusted services. The startup helps their customers to find the right service professionals for activities important house works. Their vision is to use technology and smart processes to structure the highly unorganised services market in India and emerging markets.
Trifecta Capital is an early stage technology fund that invests in the best start-ups. Current portfolio companies include Equipment Share, Second Spectrum, Moltin and others. Trifecta Capital is a top quartile Silicon Valley-based seed fund. The venture capitalist is industry agnostic and look to support companies starting at seed stage but continue our support until IPO.
Commenting on the funding Rahul Khanna, managing partner at Trifecta Capital, said: “We are very focused on identifying category leaders. The venture debt firm has so far committed Rs 300 crore to 21 startups in the last 18 months through its Trifecta Venture Debt Fund I, the target corpus for which is Rs 500 crore.”
The venture debt firm has invested in several startups such as BigBasket, Rivigo and Urban Ladder.
Accounts for 70% of health services exports, finds survey
Medical tourism has been the largest contributor to India’s total health services exports, accounting for 70 per cent of the total revenues of $890 million earned in 2015-16, according to the first comprehensive government survey on the sector.
Asian countries, led by Bangladesh, Iraq, Pakistan and the Maldives, accounted for more than 60 per cent of the foreign exchange earnings of health services.
India’s major trade partners, the US and the EU, accounted for 14 per cent and 11 per cent, respectively, according to the survey compiled by the Directorate-General of Commercial Intelligence and Statistics under the Commerce Department.
■ 60% of the earnings come from Bangladesh, Iraq, Pakistan and the Maldives
■ 14% from the US
■ 11% from the EU
“The personalised services and care that patients in India get is much cheaper than the services offered in developed countries and even in countries in the ASEAN, Middle East and the CIS states,” Commerce Secretary Rita Teaotia noted in her comments.
“This, together with the support of the government in promoting India as a healthcare hub, research in healthcare and advances in information and communication technology have enhanced India’s export of health services,” Teaotia added.
Contract research was second-highest forex earner among health services, accounting for 27 per cent of export revenue. Clinical trials and telemedicine accounted for about 3 per cent of export earnings.
Orthopaedics, oncology, neurology and cardiology are the top four export revenue earners; strikingly, Ayurveda is a close fifth, much above other branches including urology, haematology, general medicine and nephrology.
The report is part of the Commerce Department’s efforts to develop a framework to collect statistics on services trade. The DGCI&S launched its pan-India survey on international trade in services in June 2016.
Along with information on medical and health value travel, the survey also captured information on telemedicine, clinical trials, contract research, distance health education and temporary overseas movement of personnel from the surveyed units.
The survey is likely to be undertaken on an annual basis by DGCI&S.
Japanese investor SoftBank has pumped in about Rs 1,675 crore in fresh funding in Indian transportation startup Ola to give it more muscle to take American rival Uber head-on.
SoftBank subsidiary SIMI Pacific Pte picked 12,97,945 shares valued at Rs 10 at a premium of Rs 12,895 in ANI Technologies — which runs Ola — filings with the Registrar of Companies showed.
The allotment of shares was done in November last year, it added.
The latest funding, however, is believed to have come at a lower valuation.
According to sources, the move comes at a time when Softbank is working on selling Snapdeal, an e-commerce platform it invested heavily in India, to larger rival Flipkart.
The Bengaluru-based firm was aggressively looking at raising funds to compete with Uber, the world’s most valuable start-up. After selling its Chinese business to Didi last year, Uber has now set sights on India making it one of its top priorities.
Though Indian Internet companies have seen a boom in user base, their valuations have come down as investors are now focusing on path to profitability and building a sustainable business model. Flush with private equity and venture capitalist money, many start-ups continue to have high burn rate that has been a concern for investors.
Earlier this week, India’s largest e-commerce firm Flipkart raised $1.4 billion from Tencent, eBay and Microsoft in a round that saw its valuation fall from $15 billion to $11.6 billion now.
Under the new rules, the merger will also require prior approval of the Reserve Bank of India.
India will allow local companies to merge with overseas firms, easing rules to help home-grown businesses restructure their expanding global operations, and pave the deck for more listings of securities on capital markets abroad.
“Until now, only inbound mergers were permitted. With outbound mergers now permissible, there would be a lot of opportunities for Indian companies to acquire, restructure, or list on offshore exchanges as well,” said Mehul Shah, a partner at Khaitan and Co.
Until the federal notification by the corporate affairs ministry on April 13, India had permitted only inbound mergers. The merger would be in compliance with the Companies Act, 2013, and require prior approval of the Reserve Bank of India (RBI).
The notification also lists certain jurisdictions on the foreign companies, covering countries that comply with rules such as being members of the Financial Action Task Force (FATF) and whose central banks are members of the Bank for International Settlements (BIS).
Experts, however, believe that certain related laws must be amended before these rules take effect. “There would be need to have clarifications under tax laws. Exchange control regulations need to be re-looked and clarified to give effect to this notification. Also, an obligation is cast on RBI to provide approval for these mergers, as today, the RBI does not have mechanisms in place for this,” Shah added.
“Now exchange control regulations, securities laws, etc will need to be amended to facilitate a practical implementation of the amended law,” said Amit Maru, partner-transaction tax at EY.
The notification amends the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, notified in December 2016. Previously, mergers or demergers were governed by the Companies Act, 1956 before the notification of provisions of the Companies Act, 2013.
But, there were some gaps in the rules governing mergers. The latest notification seeks to fill these gaps. For instance, the law was earlier unclear on prior RBI approval even for inbound mergers, it is now clear that the nod is necessary.
“It might take some time for an Indian company to merge into a foreign company as it is not only one law but a host of laws which have to be amended before this becomes operational. For instance, income tax laws will have to be amended to give you a tax-neutral merger status because all mergers today are otherwise tax-neutral.” said Maru.The government had recently exempted firms, with Indian revenue of less than Rs 1,000 crore, from seeking the prior approval of the Competition Commission of India (CCI) while going in for a merger.
FDI inflows in the services sector rose by about 26% to $8.68 billion in 2016- 17 with the government taking steps to improve ease of doing business and attracting foreign investments.
