2013
Indo-Japan Trade & Investment
Bulletin
August Issue
Japan Desk, Corporate Professionals
Indo-Japan Trade & Investment Highlights
Claris Lifesciences Transfers its Infusion Business to JV with Japanese Companies...
Claris Lifesciences Transfers its Infusion Business to JV with Japanese Companies
Claris Lifesciences Limited announced th...
new businesses come in. The Japanese electronics giant has recently launched a range of LCDs,
LEDs and projectors targetin...
presence in the country. The Company manufactures 12 brands of whisky under its IMFL
(Indian Made Foreign Liquor) division...
202 Million till now. Started in 2010, Snapdeal has 18 million users, 1500 employees and
transacts 25,000 units a day.
Jap...
FDI POLICY UPDATES
The Government of India, vide Press notes 4, 5 and 6 (2013 series), has notified changes in the
Foreign...
Pursuant to the amendment, the scope of 'control' has been significantly expanded under the new
definition to include the ...
provides that any subsequent investment in the back-end infrastructure would be made by the
MBRT retailer as needed depend...
3. For the Test Marketing Industry, the entry route for the FDI cap which was already
100%, has been made automatic by vir...
CONTACT US
PANKAJ SINGLA
Japan Desk, Corporate Professionals
NEW DELHI (Head Office)
D-28, South Extension Part - I, New
D...
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Indo Japan Trade and Investment Bulletin August 2013

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Indo Japan Trade and Investment Bulletin by Japan Desk of Corporate Professionals
Highlights:
1. Claris Lifesciences Transfers its Infusion Business to JV with Japanese Companies
2. Honda rises to become the Second Largest Two Wheeler Player in India
3. Ricoh to Expand its Business in India
4. Panasonic looking to Increase Revenue from India
5. Tube Investments of India to Invest in a JV with Japan’s Tsubamex
6. Japanese Companies Delegating Autonomy to Local Talent
and much more
Knowledge Centre: FDI Policy Update

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Indo Japan Trade and Investment Bulletin August 2013

  1. 1. 2013 Indo-Japan Trade & Investment Bulletin August Issue Japan Desk, Corporate Professionals
  2. 2. Indo-Japan Trade & Investment Highlights Claris Lifesciences Transfers its Infusion Business to JV with Japanese Companies Honda rises to become the Second Largest Two Wheeler Player in India Ricoh to Expand its Business in India Panasonic looking to Increase Revenue from India Tube Investments of India to Invest in a JV with Japan’s Tsubamex Japanese Companies Delegating Autonomy to Local Talent Japan’s Mitsui Chemicals and Itoh Oil Chemicals Co. enter JV with India’s Jayant Agro Tilaknagar Industries to Sell Substantial Stake to Global Players School building Financed by Japan Inaugurated in Chandel District Indian arm of Japan’s INTAGE Group enters Strategic Alliance with India’s RS Market Research Organization Japan’s Recruit Holdings Acquires India’s NuGrid Consulting Snapdeal Raises USD 75 Million from Japan’s Softbank Japan’s Denso Corporation announce Delisting Offer of its Indian Subsidiary Maruti Suzuki to Enter LCV Segment in India Knowledge Centre FDI Policy Updates INDEX
  3. 3. Claris Lifesciences Transfers its Infusion Business to JV with Japanese Companies Claris Lifesciences Limited announced that it has completed the transfer process of its Infusion business in India & emerging markets to its JV with the Japanese pharmaceutical company Otsuka Pharmaceutical Factory, Inc. Japan and Mitsui & Co, Ltd. Claris has receive a total of INR 10.50 Billion through this transaction in which it will continue to hold 20% stake in the JV with Otsuka owning 60% stake and Mitsui a stake of 20%. Honda rises to become the Second Largest Two Wheeler Player in India Honda Motorcycle & Scooter India Private Limited, the Indian two wheeler arm of Japan‟s automobile major Honda, has gained the number two position in the Indian two – wheeler market for the first time by recording a growth of 20 percent. The company has sold 0.287 Million units during the month under review against 0.252 Million units in the same month last year owing to steady demand and increase in production due to a second production line at its third factory in Karnataka. Ricoh to Expand its Business in India The Indian subsidiary of Japan‟s Ricoh Company is planning to invest INR 2.5 billion to expand its business in India. A major chunk of the investment to be made by Ricoh India Limited will come from its internal finances. The company recorded a growth of 47% last year and is aiming to increase it to 55% with a top line of INR 10 Billion in 2014. The Company also inaugurated a refilling machine at its toner bottling plant at Gandhinagar, Gujarat. Panasonic looking to Increase Revenue from India The consumer durables major hailing from Japan, Panasonic, is planning to invest INR 15 Billion in India over the next three years with a view to increase the revenue it earns from India. Out of this planned investment, the company plans to invest INR 4.5 Billion in the current fiscal. The Company which currently has a workforce of 12,500 in India will expand its manpower as Indo-Japan Trade & Investment Highlights
  4. 4. new businesses come in. The Japanese electronics giant has recently launched a range of LCDs, LEDs and projectors targeting the Indian education sector and enterprises. The firm rolled out plasma interactive displays in sizes of 25 inch to 103 inch, professional LED displays that consume less power, and a series of projectors with high image quality that are suitable for classroom lectures, corporate presentations and digital signage. Tube Investments of India to Invest in a JV with Japan’s Tsubamex The Tube Investments of India Limited in its Board meeting held on 02nd August 2013 has approved and authorized the investment in a new JV company to be incorporated in India with Japan‟s Tsubamex Company Limited. The Company will seek the consent of its shareholders through the postal ballot process. Japanese Companies Delegating Autonomy to Local Talent Senior leaders of Japanese blue chip companies in India are increasingly delegating the autonomy of their businesses to local managers in India – a considerable departure from the traditional Japanese management approach. Companies like Hitachi, Panasonic, Toyota, Toshiba and Canon have all promoted senior Indian managers for them to take bigger roles. This has come in an effort to include more localized products in their portfolio and the realization that effective localization of management can generate tremendous cost efficiencies in the production processes. Japan’s Mitsui Chemicals and Itoh Oil Chemicals Co. enter JV with India’s Jayant Agro Japanese firms Mitsui Chemicals Inc and Itoh Oil Chemicals Co. have entered into a JV with India‟s Mumbai based oleochemical company Jayant Agro to invest in the shares of Vithal Castor Polyols Pvt Ltd to focus on manufacturing castor oil based. The Indian partner, who shall be holding 50% of the stake in the JV, is a company with four subsidiaries and has a turnover or INR 18000 Million. Tilaknagar Industries to Sell Substantial Stake to Global Players India‟s Tilaknagar Industries is planning to sell 15-20% stake to global giants like Suntory and Pernod Ricard to raise INR 6 Billion and acquire distilleries and regional brands to expand its
  5. 5. presence in the country. The Company manufactures 12 brands of whisky under its IMFL (Indian Made Foreign Liquor) division and has a current capacity of producing more than 150,000 liters of alcohol per day. School building Financed by Japan Inaugurated in Chandel District Minister and Deputy Chief of Mission, Embassy of Japan, Yasuhisa Kawamura congratulated the people of Chandel district at the inaugural function of a newly constructed school building that has been financed by the Embassy of Japan in India. He appreciated the members and workers of Anallon Christian Development Committee for completing the project on time and expressed his hope that the new school will be able to impart meaningful education to many children. Indian arm of Japan’s INTAGE Group enters Strategic Alliance with India’s RS Market Research Organization INTAGE India, the Indian arm of Japan‟s INTAGE group has entered a strategic alliance agreement with India‟s New Delhi based RS Market Research Organization with a view to enhance the group‟s presence throughout Asia. RS Market Research Organization is a one stop solution market research firm that provides research & data collection services to its clients through its 10 offices located in different areas of the country. Japan’s Recruit Holdings Acquires India’s NuGrid Consulting The Japanese HR service provider Recruit Holdings through its wholly owned subsidiaries - RGF Hong Kong and RGF HR Agent Singapore has acquired NuGrid Consulting, an Indian executive search firm for INR 1.5 Billion. Post acquisition, the acquired company shall be rechristened to be called RGF Executive Search India Private Limited. Recruit holdings, which has been consistently expanding its operations, has reached 21 cities in 9 countries in Asia as of July 2013. Snapdeal Raises USD 75 Million from Japan’s Softbank Snapdeal, the Indian e-retailer, has raised USD 75 Million from Japan based telecommunications, Internet and Media conglomerate, Softbank, its second fund raiser after raising a similar amount 3 months ago. The Company has managed to raise approximately USD
  6. 6. 202 Million till now. Started in 2010, Snapdeal has 18 million users, 1500 employees and transacts 25,000 units a day. Japan’s Denso Corporation announce Delisting Offer of its Indian Subsidiary Denso India Limited, the Indian arm of Japan‟s Denso Corporation has announced that the parent company has dispatched the Bid Letter to shareholders holding shares of the company as on 16th August 2013 in respect of the proposed acquisition and delisting of the equity shares of the company from the stock exchanges. The Delisting Offer of the Company is scheduled to open on 17th September 2013. Maruti Suzuki to Enter LCV Segment in India To set off the impact of slowdown in the Indian passenger car market, Maruti Suzuki is planning to enter into the LCV segment. It has been touted that the Company will be using Fiat‟s MultiJet diesel engine in the LCV named Suzuki Carry which will be open to sale in the sub content in the next two years. It is possible that the Indian LCV will derive its roots from this mini truck.
  7. 7. FDI POLICY UPDATES The Government of India, vide Press notes 4, 5 and 6 (2013 series), has notified changes in the Foreign Direct Investment (FDI) Policy, which was cleared by the Cabinet in August this year. The amendments include increase in the sectoral investment limits across different sectors, easing of conditions for multi-brand retail and a more restrictive definition of „control‟ of a company. On 22nd August, 2013 the Department of Industrial Policy and Promotion (DIPP) of Ministry of Commerce & Industry, Government of India vide Press Note No.4 (2013 series) made changes in the definition of “Control”: The concept of “control” is a crucial issue for the regulators in India and the concept has been used widely while granting critical permissions to the corporate e.g. SEBI relies on the concept of control at the time of determining the applicability of mandatory open offer requirements to a company under the SEBI Takeover Regulations. Similarly the Competition regulator under the competition laws rely on the concept of control for merger control and granting permissions for combinations; under FDI Policy, the government uses the concept while dealing with the question of downstream investments by Indian companies that are owned or controlled by foreign investors, and most recently, in the Companies Act, 2013 where, in fact, Section 2(27) of the newly enacted Act also defines the term „Control‟. Under the policy of foreign direct investment framed by DIPP, the existing definition of 'control' was an objective definition that linked control to power to appoint majority of directors. The definition as was given in the policy prior to the amendment relied mainly on the power to appoint directors of a company as is clear from the definition,“A Company is considered as “controlled ” by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company.” However, after a reconsideration of the existing policy on the definition of control under the FDI regime, the Cabinet Committee on Economic Affairs (CCEA) approved the proposal of the DIPP for amendment of the existing definition of 'control' under the FDI policy which has been notified on 22nd August, 2013 by DIPP with immediate effect. Knowledge Center
  8. 8. Pursuant to the amendment, the scope of 'control' has been significantly expanded under the new definition to include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. For the sake of clarity, the new definition is reproduced below: “Control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements” Analysing these amendments, one can conclude that among others, the key reasons for the amendment are to align this new definition with the Companies Act, 2013 and the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011. This change may have a much larger impact on structure FDI transactions in India especially on transactions where foreign investors tried to circumvent the sectoral cap prohibitions through these loop holes in the definition of control. Another implication of this amendment is the new resulting concept of a „foreign controlled company‟. What this means is that even the mere existence of veto or affirmative rights in favour of non-residents could lead to the operating-cum- investing company being regarded as a 'foreign controlled company‟. However, some degree of comfort may be drawn from the recently approved Jet - Etihad transaction where the Indian regulators cleared the investment by Etihad in Jet Airways with certain affirmative rights that are not being regarded as 'acquisition of control'. DIPP has also notified Press Note No.5 (2013 series) that has made changes into the conditions of FDI in Multi brand retail. As is common knowledge, the long discussed and debated matter of FDI in Multi-brand retail was given green signal by the Indian Government in September, 2012 vide press note 5 of 2012. The current FDI Policy allows upto 51% FDI in multi brand retail. This means that foreign retail giants like Carrefour, Tesco and Walmart can set up hypermarket chains with an Indian joint venture partner to enter into the retail business in India. Where the modified policy had been notified, there still remained some ambiguity in some of the conditions stipulated for FDI in Multi Brand Retail Trade (MBRT) which are now clarified through this Press Note 5 of 2013: 1. Back-end Infrastructure: The FDI policy for MBRT required a minimum of 50% of the total FDI to be invested in the back-end infrastructure of the MBRT company receiving FDI within three years of receiving first tranche of FDI. The Note 5 of 2013 provides for a limit on such requirement of investment into the back-end infrastructure and has limited it to 50% of the first tranche only and such first tranche shall be of US $100 million. Therefore, the amendment
  9. 9. provides that any subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed depending upon its business requirements and the mandatory requirement of minimum 50% would not be applicable on such further investments. 2. Minimum Sourcing Requirement: The other significant change in FDI policy with regard to the MBRT addresses the issue of minimum mandatory sourcing requirement. The MBRT companies with FDI were earlier required to source at least 30% of the value of procurement of the manufactured/processed products from Indian micro, small and medium enterprises (“small industries”) which have total investment of not increasing USD 1 Million in Plant & Machinery. This requirement has been revised with respect to the limit on total investment in small industries which has now been increased to a maximum of USD 2 Million‟. It is, however, interesting to note here that the „small industry‟ status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a small industry for this purpose even if it outgrows the said investment of USD 2 Million during the course of its relationship with the said retailer. Hence, effectively this is to say that once an industry qualifies as a „small industry‟, it will continue to remain so for that particular retailer, even if it were to cross the prescribed limit of USD 2 million, although, for the new retailers, that same industry shall not qualify under this bracket of „small industry‟ for the purpose of the procurement of this 30%. In addition to this, it has been clarified that sourcing from agricultural co-operatives and farmers co-operatives would also be considered in this category of „small industry‟. 3. Geographical restrictions: the amendments in the FDI policy with respect to MBRT has now empowered the respective State Governments to take decision on notification of towns and cities beyond the earlier restrictions whereby MBRT companies having FDI could only set up retail sales outlets in cities with population of more than 10 lakh (1 million) as per 2011 census. Therefore, the respective State Governments can now make rules to relax the geographical restrictions to allow MBRT companies with FDI to set-up shops in cities and town with population less than 10 lakh (1 million) as per 2011 census. Similarly the Press Note No.6 (2013 series) has brought some positive change in sectoral caps of different sectors: The DIPP has also notified the Cabinet‟s decision to change the sectoral caps of different sectors for receiving FDI which are given as below: 1. In Telecom Services, the FDI cap has now been revised from 74% to 100%. (Entry Route - Automatic Route upto 49% and beyond 49% Government Approval). 2. For Asset Reconstruction Companies (ARC), the FDI Cap has been revised from 74% to 100% of the paid up capital of the ARC for FDI & FII. (Entry Route- Automatic Route upto 49% and beyond 49% Government Approval)
  10. 10. 3. For the Test Marketing Industry, the entry route for the FDI cap which was already 100%, has been made automatic by virtue of the deletion of the very para relating to the FDI Cap. 4. For Credit Information Companies, the FDI sectoral cap has been revised from 49% to 74% and the Entry route for the same has been made Automatic from the prior status of Government Approval. 5. For the Defence Industry, while the FDI Cap remains the same, the entry route has been amended to the investment upto 26% requiring Government approval, and above 26% requiring approval of the Cabinet Committee on Security (CSS) on case to case basis, which is to ensure the access to modern and „state- of- art‟ technology in the country. 6. In the Tea Plantation Sector, while there has been no change in the FDI caps, the condition of compulsory divestment of 26% in favour of Indian partner/ Indian public within a period of 5 years, has been dispensed with. 7. Under the Single Brand Retail sector, the FDI Cap has not been revised but there has been an amendment in the entry route which now stands at upto 49% FDI through the Automatic Route and above 49% through the Government Approval Route. 8. In the sectors relating to Petroleum and Natural Gas (Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs.), Courier services, Commodity Exchange, Infrastructure companies in the Securities Market and Power Exchanges, the government has eased the FDI norms by doing away with the approval procedure from the government route and the investments can now be brought through automatic route. DISCLAIMER: The document has been prepared and produced only for the information purpose only and is not to be construed as an advertisement, solicitation, invitation, personal communication or inducement of any kind by the Firm, the author or any of its Partner or associates. The entire content of this document has been developed on the basis of relevant statutory provisions and as per the information available at the time of the preparation. Though the author has made utmost efforts to provide authentic information, however, the material contained in this document does not constitute/substitute professional advice that may be required before acting on any matter. The author and the firm expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.
  11. 11. CONTACT US PANKAJ SINGLA Japan Desk, Corporate Professionals NEW DELHI (Head Office) D-28, South Extension Part - I, New Delhi – 110049 Tel: +91-11-40622200 Dir: +91-11-40622293 Fax: +91-11-40622201 Mob:+91-99715-08320 Email: pankaj@indiacp.com MUMBAI: Mastermind- I, Royal Palms Estate, Aarey Colony, Goregaon (East), Mumbai -400065 Tel: +91 9820079664 Fax: +91 9810037390 FARIDABAD (DELHI NCR): 565, Sector-7B, Faridabad, Haryana-121006 Tel: +91 129 4061130 Fax: +91 129 2241017 Bedford (UK) 2-4 Mill Street, Bedford MK40 3HD U.K. Tel: +44 (0) 2030063240 Fax: +44 (0) 2030063241

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