Opportunities in India

1
Contents
Contents ......................................................................................................................1
Foreword..................................................................................................................... 2
FDI India Inc. - Then................................................................................................... 3
FDI India Inc. - Now.................................................................................................... 4
FDI Synopsis of Germany in India............................................................................... 6
Regulatory Framework & Entry Options For German Firms ...................................... 11
India Opportunities for German Investors - Segmentation and Opportunity.............16
Industrial Machinery..................................................................................17
Textile Machinery Industry........................................................................19
Process Plant Equipment..........................................................................21
Earthmoving, Construction & Mining Equipment..................................... 22
Heavy Electrical & Power Generation Equipment.................................... 24
ESDM & Computer Hardware .................................................................. 26
The Smart City Initiative........................................................................................... 28
Country Profile.......................................................................................................... 30
State Profiles and Incentives.................................................................................... 33
Maharashtra............................................................................................. 33
Tamil Nadu............................................................................................... 36
Karnataka................................................................................................. 39
Gujarat ..................................................................................................... 42
Delhi, Haryana & NCR ............................................................................. 45
Case studies ............................................................................................................. 49
Case Study 1 - WÜRTH............................................................................ 50
Case Study 2 - STEAG ............................................................................ 52
Case Study 3 - ZEPPELIN ....................................................................... 54
Case Study 4 - BURGMANN.................................................................... 57
Conclusion ................................................................................................................ 59
Appendix................................................................................................................... 60
About Geovadis ....................................................................................... 60
Sources.................................................................................................... 60

2
Foreword
German FDI in India continues to move from strength to strength. Currently
weighing in as the 7th largest foreign investor in India
1
, Germany’s position
highlights not only great co-operation now, but great potential for the future. These
are exciting times for both nations, due to the ambitious and very real economic
philosophy of Narendra Modi’s “Make in India,” “Skill India” and “Digital India”
initiatives. It has been decades since India has enjoyed a stable majority
government, giving it now the luxury of undertaking mass reforms to transform the
Indian investment landscape for FDI.
Being the 2nd most populous country in the world upheld by backbone of an
enviable growth rate, the belief in the India growth story has never been more
potent. From a foreign investor standpoint, India is coming off not only a record
quarter of FDI flows, but has also attracted the highest inflow of FDI in the world -
registering a handsome US$3 billion more than China.
2
India’s rank for ease of
conducting business has jumped 12 spots, and the IMF has given India the
prestigious distinction of being the brightest spot in the global economy.
3
From a German perspective, collaboration on Indian soil has yielded some major
success stories - in particular in areas where German knowledge in high-tech
manufacturing is sought. With wages on the rise, India can no longer rely on its
traditional labor cost advantage to remain globally competitive. India must protect
its reputation as a major global industrial hub with high technology that drives cost
savings from the factory floor to finished products. Given Germany’s reputation for
being a powerhouse in R&D with acute technical capabilities, the potential to
collaborate is high.
Instances of high-tech manufacturing in FDI can be found across a diverse range of
sectors from pharmaceuticals to ceramics. However, there are certain key sectors
that we feel present greater opportunity than others in that they display large
degree of technological gaps that German industry can help to address. Our report
is divided to highlight specific areas of opportunity, and to provide a critical analysis
of geographic locations where these advantages can be sustained. Furthermore, we
will offer insight into various Indo-German success stories via case studies, that will
offer potential market entry strategies for German small to medium enterprises
(SMEs).
Disclaimer:
Market Opportunities in India
for German Enterprises is a
Geovadis report. Lead author:
Kunal Saigal, as part of his
MBA program study at the
IBUH School of Business,
Berlin.
Copyright © 2016 by
Geovadis
All rights reserved. No part of
this publication may be
reproduced, distributed, or
transmitted in any form or by
any means, including
photocopying, recording, or
other electronic or
mechanical methods, without
the prior written permission of
Geovadis, except in the case
of brief quotations, and only if
accompanied by proper
source citation. For
permission requests, write to
Geovadis, addressed
“Attention: Permissions
Coordinator,” at
info@geovadis.com.

3
FDI India Inc. - Then
The recently elected Narendra Modi government has been anything but subtle
about their ambitious plans to unlock a number of Indian commercial sectors to
foreign direct investment (FDI). Set against a backdrop of decades of protectionist
and cumbersome FDI policy, the global investment community has long waited for
India to be truly ‘open for business’.
Predominantly a socialist economy since its 1947 independence, despite the touted
‘great reforms of 1991’ - where the world was promised access to India’s vast
market - rhetoric has not matched practice. Rather, we witnessed the delicate
unwrapping of the Indian market by a series of clumsy hands, courtesy of a legacy
of unstable coalition governments, red tape, self-interest lobbying and creaky
infrastructure.
The FDI landscape in India did not see radical transformation until recently, as it
was embroiled in a battle between Indian federalism versus local suspicion, which
resulted in substantial uncertainty about foreign investment policies. The federal
government is theoretically in charge of establishing the legal framework for India to
implement FDI reforms. However, the states of India have the ultimate say in
whether and how these federal FDI guidelines are implemented within the
parameters of state laws and regulations. Hypnotized by the notion that FDI brings
no true economic benefit and steals local jobs, the federal government’s
liberalization policies were kept at arm’s length by the states. At the same time, no
state government wanted to challenge powerful lobbies and to agitate key vote
banks such as farmers and trade unions by announcing sweeping reforms. Both
instinct and interest were driven politically and not economically.
As the trickle down effects of even the meager FDI flows in the 90s grew towards
the new millennium, the handful of neo-liberal FDI policies announced by the ruling
governments were increasingly supported with a more transparent legal and
procedural framework. Where once FDI in a majority of sectors was completely off
limits for foreigners, and approval of others required a lengthy and bureaucratic
approval process, the gradual liberalisation of FDI gained momentum through the
turn of the century. By the early 2000s the term “FDI” had shed the negative
connotation that political parties in opposition to the government had ascribed to it.
With the realization that there were substantial economic gains to be made, policy
measures in support of FDI were streamlined.
By 2011, many sectors which were previously either off-limits or capped with low
levels of maximum permissible foreign ownership, were extensively opened up to
FDI.

4
FDI India Inc. - Now
Results of the 2014 Indian general election led to the formation of the first single-
party majority government at the federal level in over two decades under the
Bhartia Janta Party (BJP). From a foreign investor perspective, a non-coalition
government would help to reduce the arm-twisting power that smaller regional
parties had previously exercised by defying pro-FDI reforms. The mood in all
sections of the Indian economy was nothing short of euphoric.
Over the past two years, the ruling BJP has been swift in pushing through key
reforms. With a clear focus on boosting foreign investments, the BJP has
implemented FDI related Reforms and liberalization in 15 major economic segments
in addition to a host of others. These segments include:
 Limited liability partnerships, downstream investment and approval conditions
 Investment by companies owned and controlled by Non-Resident Indians (NRIs)
 Establishment and transfer of ownership and control of Indian companies
 Agriculture and animal husbandry
 Plantation
 Mining and mineral
 Defense
 Broadcasting
 Civil aviation
 Increase of sectoral cap
 Construction development sector
 Cash and carry wholesale trading / Wholesale trading
 Single brand retail trading and duty-free shops
 Banking-private sector
 Manufacturing sector (ESDM)
The primary focus of these reforms is to create greater opportunity and to simplify
the process of foreign investment. By permitting more FDI proposals on an
automatic route, instead of a government approval route requiring in-depth
government review, immense time and energy of foreign investors is preserved.
4
In
addition, the generous increase of sectoral caps allows foreign investors to
substantially scale up operations.
Such reforms have quickly borne fruit, snapping a three-year southward economic
trend. Already, a 50% rise in FDI was seen in India’s manufacturing sector during
2014-15 - a tribute to the success of Modi’s “Make in India” manufacturing initiative.

5
FDI into India increased by 37% to US$39.32 billion during 2015, which can be
attributed to the ease in doing business stemming from recent reforms, according
to the Economic Survey of India, 2015-2016.
5
The largest beneficiary of these developments was the manufacturing sector, which
increased to US$9.6 billion, and which comprised 38% of total FDI received. It is
worth pointing out that it is the first time in three years that FDI in manufacturing
registered a positive increase. Due to the BJP’s push toward making India a global
manufacturing powerhouse through a focus on high-tech, FDI growth in this sector
is of supreme importance.
Even greater than manufacturing, the financial services sector soared even higher,
witnessing an almost 200% rise in flows. The other major growth sector was
another high-tech industry: the computer software and hardware industry, which
experienced a 130% rise in FDI from US$934 million to US$2.15 billion between FY14
and FY15. Clearly, the data
indicates that the Indian
federal government's efforts
to improve the ease of doing
business and to relax FDI
regulations is yielding results.
6
According to a report
released by Grant Thornton
India, the total value of
merger and acquisition (M&A)
and private equity (PE) deals
in the month of August 2015
were valued at US$2.6 billion (151 deals), which is a 62% increase in volume as
compared to August 2014. The report further states that with the recent “Make in
India” push in 2016, coupled with “recent FDI norms and the much awaited GST will
perhaps be a game changer and will further accelerate the deal activity from an
inbound investment, domestic M&A and PE perspective."
7
From an FDI perspective, Geovadis suggests that Snohomish County would find
benefits from marketing particularly at the Final Goods Production and Primary and
Secondary Operation of Technical Facilities stages of the value chain, with a
particular focus on the environmentally friendly power generation, storage and
distribution lead market. These stages of the chain would benefit from close
proximity to the area’s clean tech research universities and industry clusters, as well
as benefiting from the area’s extensive experience with high-tech manufacturing.
Additionally, the area’s proximity to Canada and shipping routes to Asia, might also
benefit Logistics.

6
FDI Synopsis of Germany in India
Cumulative FDI Inflows
1. Cumulative FDI inflows (including equity, re-invested earnings & other capital)
from April 2000 to October 2015: US$398.5 billion.
2. Cumulative FDI Equity Inflows (remittance-wise) from April 2000 to October 2015
were US$270.39 billion. Out of this, FDI inflows from Germany (which ranks 7th) has
contributed US$8.36 billion, representing 3.09% of cumulative FDI inflows into India
between 2000 and April 2016.
3. Historic German FDI Equity Inflow Since Liberalization (From April 2000 To
October 2015)
 Rank: GERMANY ranks 7th
 Percentage share of total FDI inflows: 3.09%
 Total FDI Inflows from GERMANY: are US$8.36billion
4. Recent German FDI Equity Inflow From April 2015 To October 2015
 Rank: GERMANY ranks 6th
 Percentage share of total FDI inflows: 3.30%
 Total FDI Inflows from GERMANY: are US$721.02 million:

7
5. Financial Year Inflows Of Foreign Direct Investment (Amount of FDI inflows):
8
Financial Year
(April-March)
FDI equity inflows
From GERMANY
FDI equity inflows from all
Countries
Total FDI inflows
(including equity, re-
invested earnings &
other capital)
Rs. in
crores
US$ in
million
Rs. in crores US$ in
million
(US$ in million)
2000-01 539.84 123.34 10,733 2,463 4,029
2001-02 519.04 113.48 18,654 4,065 6,130
2002-03 684.05 143.91 12,871 2,705 5,035
2003-04 373.40 81.17 10,064 2,188 4,322
2004-05 663.18 145.35 14,653 3,219 6,051
2005-06 1,344.53 302.82 24,584 5,540 8,961
2006-07 539.82 119.95 56,390 12,492 22,826
2007-08 2,074.65 513.61 98,642 24,575 34,843
2008-09 2,749.73 629.22 142,829 31,396 41,873
2009-10 2,980.04 626.14 123,120 25,834 37,745
2010-11 907.88 199.74 97,320 21,383 34,847
2011-12 7,451.69 1,621.95 165,146 35,121 46,556
2012-13 4,684.30 859.62 121,907 22,423 34,298
2013-14 6,093.24 1,038.42 147,518 24,299 36,046
2014-15 6,904.01 1,124.86 189,107 30,931 44,291
2015-16 (up to
Oct.15)
4,580.12 721.02 140,799 21,874
30,592
Cumulative Total
(April 2000-October
2015)
43,089.53 8,364.60 1,374,337 270,508 398,445
6. Sectoral German FDI Inflows In FDI Equity Since Liberalization (from April 2000
to October 2015) (Amount of FDI equity inflows):
Rank Sector Amount of FDI equity
inflows
% age of FDI equity
inflows from
GERMANYRs. in
crores
US$ in
million
1 Automobile Industry 9,962.30 1,759.62 21.04
2 Misc. Mechanical & Engineering Industries 5,715.14 1,274.22 15.23
3 Services Sector
9
5,097.73 1,016.02 12.15
4 Chemicals (Other Than Fertilizers) 3,093.07 637.18 7.62
5 Trading 2,940.64 553.73 6.62
Total of Above 26,808.88 5,240.77 62.66

8
7. Recent Sectoral German FDI Inflows In FDI Equity Over Last 5 Years (from April
2010-2015 September) All figures quoted in US$ million
10
RANK
(cum. FDI
inflow ‘10-‘15)
SECTOR 10-‘11
(April-
March)
11-‘12
(April-
March)
12-‘13
(April-
March)
13-‘14
(April-
March)
14-‘15
(April-
March)
15-16
(Ap’15-
Sep. ‘15)
#1
($21,214)
Services:
(Financial & Non
Financial)
$3,296 $5,126 $4,660 $2,225 $4,443 $1,464
#6
($8,083)
Construction:
(Development, Housing,
Infrastructure)
$1,663 $3,141 $1,206 $1,226 $769 $81
#4
($8,616)
Telecommunication
(Mobile, Paging, Radio,
Cellular Services)
$1,665 $1,997 $93 $1,307 $2,895 $659
#5
($8,490)
Computer Software &
Hardware $780 $796 $435 $1,126 $2,296 $3,057
#7
($7,452)
Pharmaceuticals & Drugs $209 $3232 $1,008 $1,279 $1,498 $226
#2
($8,967)
Chemicals ( Non-
Fertilizer)
$2,354 $4,041 $268 $878 $763 $393
#9
($5583)
Power
$1,272 $1,652 $526 $1,066 $707 $360
#3
($8,824)
Automobile
$1,299 $923 $895 $1,517 $2,726 $1,464
#10
($5,449)
Metallurgical Industries
$1,098 $1,786 $1,385 $568 $359 $253
#11
($4,924)
Hotel & Tourism
$308 $993 $3,190 $433
#8
($7,097)
Trading $718 $1,343 $2,728 $2,308
Services show the most stable to positive inflow growth in FDI. The automobile
industry shows the most promising growth trajectory as does the software and
hardware industry. The metallurgical industries show the most sluggish downward
growth trend. Because the chemical industry had two bumper years which account
for a bulk of why they rank #2, overall they appear to be “false favorites.” However,
it is worth examining recent policy measures relating to each of these sectors to
consider their future degree of relative (un)attractiveness.

9
8. Top FDI Inflows Received From Germany By Company (remittance-wise)
(through Indian companies, from Apr. 2000 to Oct. 2015)
11
:
Sl.
No
Name of
Indian
Company
FDI
Route
Name of Foreign
Collaborator
RBI Regional
Office
Item of Manufacture Amount of FDI
Inflows
(In Rs
crore)
(In US$
million)
1 Siemens Ltd Rbi Siemens
Aktiengesellschaf
t
Region Not
Indicated
Electrical & Electronic Engg 5,140.42 1,146.04
2 Daimler India
Commercial
Vehicles Pvt Lt
Rbi Daimler AG Chennai Manufacture Of Motor
Vehicles For The Transport
Of Goods, Manufacture Of
Special Purpose Heavy
Motor
2,075.98 377.38
3 Daimler India
Commercial
Vehicles Pvt Lt
Rbi Daimler AG Chennai Manufacture Of Commercial
Vehicles Such As Vans,
Lorries, Over-The-Road
Tractors For Semi-Trailers;
Etc:
1,485.99 236.80
4 Vai Metals
Technologies
Pvt Ltd
Rbi Siemens Vai
Metals
Technologies
Gmbh
Mumbai Other Specialized
Construction Activities
1,028.41 165.77
5 Man Force
Trucks Pvt Ltd
Rbi Man Truck & Bus
AG
Region Not
Indicated
Mfg Of Heavy Commercial
Vehicles
1,016.51 186.84
6 Daimler India
Commercial
Vehicles Pvt Lt
Motor
933.89 152.24
7 Micro Inks Ltd Fipb Mhm Holding
Gmbh
Region Not
Indicated
Mfg Printing Inks/ Pkg Inkd,
Resins, Enamels Adhesives
847.82 190.95
8 Apollo Energy
P Ltd
Rbi Dky Inil Health
Holding
New Delhi Manufacture Of Power
Capacitors
736.72 151.80
9 Daimler India
Commercial
Vehicles Pvt Lt
Motor
584.25 93.85
10 Sigma
Freudenberg
Nok Pvt Ltd
Rbi Freudenberg SE Region Not
Indicated
Manufacture Of Oil Seals
For Automotive
571.20 92.02
11 Bajaj Allianz
Lic Ltd.
Rbi Allianz SE Mumbai Insurance Carriers, Life 509.88 118.75
12 Man Force
Trucks Pvt Ltd
Rbi Man Truck & Bus
AG
Mumbai Manufacture Of Motor
Motor
475.17 85.52
13 Metro Cash &
Carry India
Pvt. Ltd
Rbi Metro Cash &
Carry
International
Gmbh
Bangalore Wholesale Trade Via E-
Commerce Excluding
Activities Of Commission
Agents
400.00 62.70
14 Volkswagen
Finance Pvt
Ltd
Rbi Volkswagen
Financial Services
AG
Mumbai Other Business Services Not
Elsewhere Classified Or
Included
397.78 73.02
15 Metro Cash &
Carry (I) P.
Ltd.
Fipb Metro Cash &
Carry
International
Gmbh
Bangalore Trading 381.16 89.01

10
16 Triveni
Polymers Pvt
Ltd
Rbi Gerresheimer
Glas Gmbh
Region Not
Indicated
Mfg Of Primary Plastic
Packaging Products
375.38 69.11
17 Bajaj Allianz
Lic Ltd.
Rbi Allianz SE Mumbai Insurance Carriers, Life 302.72 74.23
18 Daimler
Financial
Services India
Private
Rbi Daimler AG Chennai Financial Leasing 290.00 46.21
19 Indian Oil
Tanking Ltd.
Fipb Oil Tanking India
Gmbh
Mumbai Construction And
Maintenance Not Elsewhere
Classified
285.71 66.54
20 Continental
Automotive
Components
(India
Rbi Continental
Automotive
Gmbh
Bangalore Manufacture Of Diverse
Parts And Accessories For
Motor Vehicles Such As
Brakes, Gearboxes, Axles,
Etc.
281.60 44.87
21 Man Trucks
India Pvt
Ltd(Man Force
Truck
Rbi Man
Nutzfahrzeuge Ag
(Now Known As
Man Truck)
Mumbai Manufacture Of Motor
Motor
260.00 42.70
22 Neo Structo
Construction
Ltd
Rbi Bilfinger Berger
Industrial
Services Gmbh
Region Not
Indicated
Maintenance,
Mfg,Installation Services In
Process Industry
258.55 51.38
23 Metro Cash &
Carry India
Pvt. Ltd
Rbi Metro Cash And
Carry
International
Gmbh
Bangalore Wholesale Trade In Cereals
And Pulses Other Than By
Procurement Agencies
250.00 40.57
24 Metro Cash &
Carry India
Pvt. Ltd
Rbi Metro Cash &
Carry
International
Gmbh
Bangalore Wholesale Trade In Cereals
And Pulses Other Than By
Procurement Agencies
250.00 46.49
25 Continental
Automotive
Components
(India
Rbi Continental
Automotive
Gmbh
Bangalore Manufacture Of Laboratory
And Scientific Instruments
N.E.C. (Includes
Manufacture Of Non-Optical
Mic
236.16 43.35

11
Regulatory Framework & Entry
Options For German Firms
FDI in India is divided into sectors that fall under the “automatic approval route”
and “government approval route.” The automatic route connotes sectors for which
there is no requirement of any prior governmental regulatory approval - only post
facto filing / intimation with the RBI as under:
 Filing of an intimation with the RBI, in the prescribed format, within 30
days of receipt of investment money in India
 Filing of prescribed documents and particulars of issue of shares within 30
days of issue of shares to foreign investors
FDI by a foreign company/investor in an Indian company in most of the
business/commercial sectors now falls under the automatic approval route, meaning
that very few cases/transactions now require prior Government/Foreign Investment
Promotion Board (FIPB) approval.
If the FDI exceeds the ceiling (cap) fixed by the Government of India, then, the
application for Foreign Investment Approval needs to be submitted to the FIPB.
In addition, certain FDI flows are usually considered to be ‘non automatic’ and
require FDI in sectors/transactions to have prior government approval, falling under
the government approval route. Such approval is granted by the Government of
India, Ministry of Finance and FIPB. FDI in the following activities/sectors generally
requires prior approval of the government:
 Where more than 24% foreign equity is proposed to be inducted for
manufacture of items reserved for the Small Scale sector
 Proposals in which the foreign collaborator has an existing
financial/technical collaboration in India in the ‘same’ field as per the Press
Notes 1 and 3 of 2005
12

12
For all proposals falling outside notified sectoral caps or under sectors in which FDI
is not permitted under the automatic approval route, FDI policy is reviewed on an
ongoing basis and changes in sectoral policy / sectoral equity caps are notified
through Press Notes.
Once the relevant sector has been identified, the firm must decide how it would like
to establish itself within India. There are several options available to German firms
interested in entering the Indian market.

13
Incorporating A Company In India
 It can be a private or public limited company. Both wholly owned & joint
ventures are allowed. A private limited company requires minimum of two
shareholders.
 Under RBI approval. RBI decides the application in consultation with
Government of India.
1) As an Indian Company
A foreign company can commence operations in India by incorporating a company
under the Companies Act, 1956 through Joint Ventures or Wholly Owned
Subsidiaries. Foreign equity in such Indian companies can be up to 100% depending
on the requirements of the investor, subject to equity caps in respect of the area of
activities under the FDI policy. Details of the FDI policy, sectoral equity caps and
procedures can be obtained from Department of Industrial Policy & Promotion,
Government of India.
2) As a Wholly Owned Subsidiary Company
Foreign companies may set up a wholly owned subsidiary in sectors where 100%
foreign direct investment is permitted under the FDI policy. For registration and
incorporation, an application has to be filed with Registrar of Companies (ROC).
Once a company has been duly registered and incorporated as an Indian company,
it is subject to Indian laws and regulations as applicable to other domestic Indian
companies.
3) As a Joint Venture With An Indian Partner
Foreign Companies may set up their operations in India by forging strategic
alliances with Indian partners. Joint Venture may entail the following advantages for
a foreign investor:
 Established distribution/ marketing set up of the Indian partner
 Available financial resource of the Indian partners
 Established contacts of the Indian partners which may help to smooth the
process of setting up of operations
4) As a Foreign Company
Foreign Companies can set up their operations in India through:
 Liaison Office/Representative Office
 Project Office
 Branch Office

14
Such offices can undertake any permitted activities. Companies have to register
themselves with Registrar of Companies (ROC) within 30 days of setting up a place
of business in India.
a) Liaison office/ Representative office: A liaison office acts as a channel of
communication between the principal place of business or head office and entities
in India. A liaison office cannot undertake any commercial activity directly or
indirectly and cannot, therefore, earn any income in India. Its role is limited to
collecting information about possible market opportunities and to providing
information about the company and its products to prospective Indian customers. It
can promote export/import from/to India and also facilitate technical/financial
collaboration between the parent company and companies in India. The approval for
establishing a liaison office in India is granted by the RBI.
b) Project Office: Foreign companies planning to execute specific projects in India
can set up temporary project/site offices in India. The RBI has now granted general
permission to foreign entities to establish project offices subject to specified
conditions. Such offices cannot undertake or carry on any activity other than the
activity relating and incidental to execution of a specific project. Project offices may
remit outside India the surplus of the project on its completion, general permission
for which has been granted by the RBI.
c) Branch Office: Foreign companies engaged in manufacturing and trading
activities abroad are allowed to set up branch offices in India for the following
purposes:
 Export/Import of goods
 Rendering professional or consultancy services
 Carrying out research work, in which the parent company is engaged.
 Promoting technical or financial collaborations between Indian companies and
parent or overseas group company.
 Representing the parent company in India and acting as buying/selling agents in
India.
 Rendering services in Information Technology and development of software in
India.
 Rendering technical support to the products supplied by the parent/ group
companies.
 Foreign airline/shipping company.
A branch office is not allowed to carry out manufacturing activities on its own, but
is permitted to subcontract these to an Indian manufacturer. Branch offices
established with the approval of the RBI may remit outside India profit of the
branch, net of applicable Indian taxes and subject to RBI guidelines. Permission for
setting up branch offices is granted by the RBI.

15
Branch Office on "Stand Alone Basis": Such branch offices are isolated and
restricted to a Special Economic Zone (SEZ)
13
, and no business activity/transaction
will be allowed outside the SEZs in India, which include branches/subsidiaries of its
parent office in India. No approval shall be necessary from the RBI for a company to
establish a branch/unit in an SEZ to undertake manufacturing and service activities
subject to specified conditions or market entry into India
14
Bearing this in mind, there are 14 core steps required of German companies to set
themselves up in India which can be classified as the following:
Steps German Firms Must Take To Invest In India
1. Identification of structure
2. Central Government approval if required
3. Setting up or incorporating the structure
4. Inflow of funds via eligible instruments and following pricing guidelines
5. Meeting reporting requirements of the RBI and respective Act
15
6. Registrations/obtaining key documents like Personal Account Number (PAN)
etc.
7. Project approval at state level
8. Finding ideal space for business activity based on various parameters like
incentives, cost, availability of manpower etc.
9. Manufacturing projects are required to file Industrial Entrepreneur’s
Memorandum (IEM). Some of the industries may also require an industrial
license
10. Construction/renovation of unit
11. Hiring of manpower
12. Obtaining licenses if any
13. Other state & central level registrations
14. Meeting annual requirements of a structure, paying taxes etc.
16
Limited Liability Partnerships
Allowed under the Government route in sectors which has 100% FDI allowed under
the automatic route and without any conditions.

16
India Opportunities for German
Investors - Segmentation and
Opportunity
Under the ‘Make in India’ initiative, the Government of India aims to attract foreign
capital into industrial corridors and hubs for high-tech manufacturing projects. To
achieve this, a number of policies have been taken to improve the business climate,
to strengthen the infrastructure for intellectual property rights and to raise
permissible limits for FDI. With the growth of the Indian economy - expected to
exceed 7% growth for the coming couple of years, and poised to overtake China -
India emerges as a profitable investment destination for EU companies.
Factors like growth of middle class population, rising disposable incomes, increase
in adoption of advanced technology, rollout of new telecommunications networks,
and many laptop and tablet/mobile distribution schemes by state and central
governments, are set to propel the ESDM industry in India to a high growth
trajectory. This increasing Indian electronics market demand is expected to reach
US$400 billion by 2020.
17
Current domestic electronics production growth is in
range of 5-10%. At this rate, domestic manufacturers will be able produce as much
as US$100 billion worth of electronics out of a total domestic demand of US$400
billion by 2020. This US$300 billion demand-supply gap will have to be met by
imports, which will lead to a situation where the electronics import bill for the
country will exceed the oil import bill.
The capital goods industry, a US$32 billion industry in India, covers several
subsectors in the Indian manufacturing space. Significant manufacturing is carried
out in the subsectors of electrical engineering, power plant equipment,
construction, infrastructure, process plant equipment and construction equipment
sectors as well. Today, the capital goods sector is a robust, multilevel, diversified
segment of the Indian industry environment, playing a critical role in driving growth,
creating jobs and boosting exports. However, stagnation in technological advances
hinders economic strides and efficient achievement gains.
The following are specific areas of opportunity where German high-tech
manufacturing knowledge and capabilities can fill specific gaps within the India
market via FDI. For all sectors highlighted, FDI is allowed 100% in all
activities/sectors as specified in the consolidated FDI Policy under the automatic
route without prior approval either of the Government or the Reserve Bank of India.

17
Industrial Machinery
--- 100% FDI allowed through automatic route ---
Industry definition
The machine tool industry is comprised of manufacturers of the following types of
machinery and its accessories:
 Metal cutting machinery such as lathes, milling machines, drilling / boring
machines
 Metal forming machinery such as presses, punches, forges jigs and fixtures etc.
Based on technology, machine tools can be classified into Computerized
Numerically Controlled (CNC), Numerically Controlled (NC) and Conventional.
The machine tool component industry includes manufacturers of the following
systems:
 CNC systems. A CNC system is a form of programmable automation in which
the machine tool is controlled by a program in computer memory.
 Servo motors. A servo motor is an automatic device which uses error-sensing
feedback to correct the performance of a mechanism. The term applies to
systems where the feedback or error-correction signals help control mechanical
position or other parameters.
 Spindles, bearings, guide ways and ballscrews
 Cast iron products such as beds, columns and saddles
 Hydraulic systems. Hydraulic machinery refers to the machines and tools which
use fluid power to do work.
The Indian machine tools industry is a strategically key industry for German firms.
Consisting of approximately 200 machine tool manufacturers in the organized sector
and around 400 small scale units across India, the industry lacks the design and
engineering capability to undertake high precision computerized CNC machining
work.
18
Due to technology gaps in the field of metal cutting machine tools, metal
forming machines, special technologies and critical components development, the
import of technology as well as R&D initiatives are presently being utilized in an
effort to bridge the gaps.
With Germany being the world leader in machine tool exports, German firms are in
a strong position to augment the Indian machine tool industry with their proven
expertise. Advances in machine tool technology have fundamentally changed the
nature of the product itself. The shift to computer-based - and particularly
microcomputer-based - numerical controls has considerably increased the versatility

18
and flexibility of machine tools, simplified programming and allowed for more
functions to be controlled automatically. Several machine tool groups, each
representing one specific function, converged into multi-purpose machines.
Technical strides in this industry can be sustained and integrated into Indian
manufacturing through German technical knowhow.
The Verein Deutscher Werkzeugmaschinenfabriken (VDW) - the German Machine
Tool Builders Association - has identified the following current developments in
machine tool technology that would provide German manufacturers with
opportunities in India:
19
Investment Opportunities
 High performance machining
 Reduction of machining time by increase of cutting speeds.
 Dry machining
 Reduction or elimination of coolants in machining to limit environmental damage
 Micro-processing
 Metal-cutting and non-metal-cutting processes for generation of miniaturized
components, partially having geometric dimensions in the micron and surfaces
 Rapid prototyping: Rapid realization of prototypes and preproduction series of
new products for geometrical and functional testing

19
Textile Machinery Industry
Industry Definition
The textile machinery segment is comprised of the following types of machinery and
accessories:
 Ginning & pressing machines
 Spinning & allied machines
 Synthetic filament yarn machines
 Weaving and allied machines
 Processing machines
 Hosiery/RMG machines
 Textile testing equipment
 Multiple segments (combination of the above)
 Sorting machinery
 Carding machinery
 Accessories and parts Others
The textile machinery industry is a significant component of the Indian capital goods
industry. This industry comprises of over 1,446 machinery and components
manufacturing units, with over 600 units producing complete machinery, and other
units are mainly involved in the production of parts and accessories for textile
machinery. The Indian textile machinery industry takes place in both in the
organized and the unorganized sectors. In the organized sector, in addition to the
public limited companies, machinery is manufactured in independent units which
have collaborative joint ventures with the foreign entities. In the unorganized
sector, there are small-scale industrial units down to tiny units engaged in the
production of accessories related to the operation and maintenance of textile
machinery.
Spurred by galloping domestic demand for textiles and apparel ( which has grown at
over 13% per year for the last five years), with the new textile policy in place the
government hopes to achieve an ambitious target of US$650 billion by 2024-2025
for the domestic textile industry. The textile machinery market is set to double
over the next 7 years.
However, at present, many textile manufacturing companies do not currently work
to full capacity - or even to the optimum capacity level - except for units in the
spinning sector where the machinery is of international standards. In the other
sectors, Indian-manufactured machinery for weaving, knitting and wet-processing in
most cases lack the standard of quality and performance to compete with European
manufacturers. This lack of quality and performance is due to insufficient in-house

20
R&D, and to the absence of large foreign/domestic players in weaving and
processing machineries.
The following areas of technological gaps in the Indian textile machinery industry
could provide opportunity for German high tech companies:
 Shuttleless weaving machinery (rapier or jet)
 Knitting sector (circular knitting and flat knitting) machinery
 Processing machines
 Special purpose finishing machines
 Knitting and garmenting machineries
 Critical components machines including auto-coners and rotor spinning
machines with automation control
 Wider width processing machines, etc.

21
Process Plant Equipment
Industry Definition
The process plant equipment industry is comprised of the following types of
machinery and accessories:
 Tanks
 Pressure vessels
 Evaporators
 Stirrers
 Heat exchangers
 Towers & columns
 Crystallizers
 Furnaces
Process plant equipment is utilized in the energy, gas, oil, refinery, chemical &
petrochemical, fertilizer, paper & pulp, sugar, cement, and dairy industry sectors.
There are over 200 units engaged in the manufacturer of process plant machinery
in India, out of which 65% are small- and medium-sized manufacturers. The sector
today is equipped with state of the art processes to engineer and fabricate complex
process equipment utilizing different materials . The plant sizes of these companies
within India have increased over time, and now some are comparable - or even
larger than - global companies.
However, domestic industry lacks knowhow on process technology, which results in
this sector being dependent on Overseas Process Licensors (OPLs). China, on the
other hand, has attempted to develop or acquire its own process technology
knowhow, by setting up research institutes and labs, and by acquiring such
expertise from other regions. At operational levels, Indian welding, forming and
machining technologies could be improved to enhance domestic productivity.
The following technological gaps in the Indian process plant equipment industry
could provide opportunity for German companies:
 Subsea equipment
 Oil well drilling
 Process gas boilers for ethylene
 Gas crackers, etc.

22
Earthmoving, Construction & Mining Equipment
Industry Definition
The earthmoving, construction and mining equipment industry is comprised of the
following types of machinery and its accessories:
 Backhoe loaders
 Compactors
 Mobile cranes
 Pavers
 Batching plants
 Crawler cranes
 Transit mixers
 Concrete pumps
 Tower cranes
 Hydraulic excavators
 Dumpers
 Mining shovels
 Walking draglines
 Dozers
 Wheel loaders
 Graders
 Drilling equipment
Currently, the Indian market consists of 20 large domestic and global
manufacturers, and 200 small- and medium-sized manufacturers of earthmoving and
mining machinery.
20
In India, open cast mining is much more popular than
underground mining, therefore much of the equipment specifically required for open
cast mining, like dumpers, dozers, shovels, draglines and excavators, is
manufactured in India.
It is worth mentioning that India is the second largest market for backhoes in the
world, and is expected to grow at annual CAGR of 11% for the next few years.
21
Opportunity also presents itself in the earthmoving equipment segment which
boasts the largest product lines. The Indian market for this is in the top three
across the world.

23
Based on Indian Ministry of Public Enterprises forecasts looking forward at the next
20 years, there is a need to develop indigenous capability in respect of the following
product groups in order to be able to meet market demand:
22
 Electric dump trucks ~ 190 ton - 240 ton
 Rope shovels ~ 42 cum.
 Walking draglines ~ 72m - 33m Cum.; 150m - 50m cum.
 Hybrid Drive Loaders ~ l0 cum. bucket
 2,500 HP electronically controlled emission compliant engines
 Long-wall mining systems
 Continuous miners for underground mines

24
Heavy Electrical & Power Generation Equipment
Industry Definition
The heavy electrical and power generation equipment industry comprises of two
broad segments:
 Generation equipment:
 Boilers
 Turbines
 Generators
 Transmission & distribution (T&D):
 Transformers
 Cables
 Transmission lines
 Switch gears
 Capacitors
 Energy meters
 Instrument transformers
 Surge arrestors
 Stamping and lamination
 Insulators
 Insulating material
 Industrial electronics
 Indicating instruments
 Winding wire
The heavy electrical and power generation equipment segment constitutes about
69% of aggregate production in the capital goods industry. The Government of
India has de-licensed the electrical machinery sector and has allowed 100% FDI. By
2022, the installed power capacity in India is expected to reach 350 gigawatts (GW)
from 243 GW in 2014, driven by increasing industrialization and economic
development. The total market size of electrical machinery in India is anticipated to
reach US$100 billion by 2022 from US$24 billion in 2013.
23
The generation equipment market constitutes 15% of the total sector and is
expected to expand at a compound annual growth rate (CAGR) of 12.7 % over
FY12–22.
24
The transmission and distribution component constitutes the remaining
85% of this sector, and has expanded at a CAGR of 6.7% over FY07-13. Boilers
(16%), cables (15%) and transmission lines and conductors (12%) account for a large
portion of this revenue.
The sector boasts of a diversified, matured and strong manufacturing base backed
by a robust supply chain. The presence of major foreign players, either directly or
through technical collaborations with Indian manufacturers, is a testimony of unique
advantages India holds in this sector.

25
With many bilateral nuclear agreements in place, India is expected to become a
major hub for the manufacture of nuclear reactors and associated components.
Foreign participation in the development and financing of generation and
transmission assets, in engineering services, in equipment supply and in technology
collaboration in nuclear and clean coal technologies is also expected to increase
With state-of-the-art technology in most sub-sectors at par with global standards,
major export markets for Indian electrical equipment exist on all continents all over
the world. German collaboration in the following areas has been identified:
 Nuclear reactors & components
 Rotating machines (motors, AC generators, generating sets) & parts
 Switchgear and controlgear
 Transformers & parts
 Cables
 Industrial electronics
 Boilers & parts
 Transmission line towers, etc.

26
ESDM & Computer Hardware
(100% FDI through automatic route)
Industry Definition:
The Electronics System Design & Manufacturing (ESDM) sector covers electronic
hardware products relating to:
25
 IT and office automation
 Telecom components
 Consumer electronics
 Electronic components
 Avionics
 Solar photovoltaic components
 Strategic electronics
 Nano-electronics
 Medical electronics
 Space & defense related items
 Design related activities like product design: chip design, VLSI, board design,
embedded systems, etc.
IT and ESDM are among the fastest growing production and export segments in
India. With complete de-licensing of the electronics industry with the exception of
aerospace and defense electronics, and with the liberalization in foreign investment
and export-import policies of the entire economy, this sector is not only attracting
significant attention as an enormous market, but also as a potential production
base for international companies.
In FY2015 the computer hardware industry in India generated US$5.3 billion in FDI
inflows, of which US$50 million of these flows were accounted for by Germany. The
huge market for computer hardware in India, coupled with the availability of a skilled
workforce, has boosted the inflow of FDI. High growth prospects, in terms of
increased consumption in India, as well as increasing demand for exports - paired
with ease in recruiting and laying-off employees and tax benefits - are expected to
lead to continuing FDI in this sector.
In terms of production, the ESDM sector is currently in nascent stages in India.
Most current demand is met through imports. Trends in consumption patterns
indicate a huge demand-supply gap and it will be unsustainable to keep pace with
the demand unless the supply aspect is taken care of in an economical fashion.
Consider the following statistics key areas for opportunity have been identified for

27
German investors.
 India currently contributes just 1.3% of global electronics hardware production
and given the fact that India is ranked 4th Globally in manufacturing
competitiveness index, it is imperative that there is a shift in production patterns
into the country.
 Electronics imports are third highest in the country next to crude oil and gold,
indicating a huge opportunity for import substitution.
 35% of electronics products manufactured by India belong to low value added
category, indicating a gap in the high end R&D and production area.
26
Expected electronic market in India by 2O2O
27
 Telecommunications equipment (US$34 billion)
 Laptops, desktops, tablets (US$34 billion)
 LED (US$35 billion)
 Consumer electronics (US$29 billion)
 Set top boxes (US$10 billion)
 Automotive electronics (US$10 billion)
 Medical electronics (US$8.5 billion)
The following areas of opportunity are based on projections of expected Indian
electronic market growth by 2020 through data provided by the indian Department
of Electronics & Information Technology:
 Setting up of Electronics Manufacturing Clusters
 Semiconductor wafer fabrication (FAB)
 Electronic components
 Semiconductor design.
 Electronics manufacturing services (EMS)
 Telecom products.
 Industrial/consumer electronics
 Data centers
 Animation, visual effects, gaming & comics (AVGC)

28
The Smart City Initiative
Experiencing a major demographic shift, the bulk of India’s population will look to
migrate from villages into cities in search of new opportunity. This new mass-
migration of urban dwellers will be supported by the “Smart City” initiative, which
aims to upgrade and build 100 cities stressing urban mobility, low-cost housing, and
sanitation and sewerage in particular.
28
Geovadis had the opportunity to conduct
an exclusive interview with one of the chief economic advisors for urban
development for Prime Minister Modi, Dr. Kumar V. Pratap. Dr. Pratap shed light on
what implications this initiative holds for German investors, and he identified three
major areas for Indo-German collaboration in high-tech functions to serve the Smart
City initiative.
Construction and housing
In order to house what is projected to become the world’s most populous nation,
the basic building blocks of any smart city would be the creation of homes and
apartments built with the utilization of environmentally friendly technologies,
sustainable amenities and non-traditional building materials. The undertaking of this
would open massive opportunities for construction machinery, sanitation equipment,
waste and water management equipment, and other capital goods in which German
manufacturers excel.
Energy and renewable energy
With the creation of smart cities, the energy upon which they run will be generated
through technologically advanced methods. With high unmet current demand and
an estimated future market demand of 900 GW by 2032, India’s power generation,
transmission and distribution systems are undergoing a massive transformation in
capacity and technology absorption.
29
A “Smart Grid” is being proposed to supply
the smart cities with electricity, while technology breakthroughs in thermal, hydro
and nuclear power capacity are being sought. India has been doubling its capacity
and investment in renewable energies every year for the last three years. Dr. Pratap
additionally indicates that the Indian federal government has targeted the
development of 100 GW of new solar energy and 60 GW of new wind energy
capacity by 2020; a huge jump from the current levels. The immense technical
knowhow, expertise and knowledge possessed by German manufacturers could play
a key role in India achieving its proposed targets.

29
Green capital goods
With its committed mission for clean and green products, India in general and smart
cities in particular will require machinery and equipment to assist its cities and local
industrial firms to effectively reduce their pollutants and waste. Effluent treatment,
water management, carbon mitigation and air pollution control are a few of the key
areas within this sector which beckon German skill sets. These requirements, in
conjunction with the Modi government's “Clean India” initiative, serve two sets of
very important nationwide goals. Earlier this year saw the German government
announce an interest in developing three smart cities - Kochi, Bhubaneswar and
Coimbatore
30
- by equipping and collaborating with Indian players to develop smart
solutions. Germany has already been engaged in a wide variety of project areas
which aid smart cities via sustainable mobility, waste and water management
systems as well as efficient energy solutions.

30
Country Profile
India is the seventh largest and 2nd most populous nation in the world, and is
comprised of 29 states and seven union territories. Rich in natural resources and
abundant in manpower, India offers many advantages to foreign investors. With the
4th highest purchasing power parity globally, India has been an attractive
destination for investors for several years now. There over a 1,000 Germans firms
presently operating on Indian soil with a majority carrying out a strategy of scaling
international operations through expansionary means. India is a key FDI destination
for German firms on many fronts.
Geographic advantage
With its location in southern Asia, India shares its border with China, Bhutan and
Nepal in the northwest, Myanmar and Bangladesh in the east, and Afghanistan &
Pakistan to the northwest. The emerging and established markets of Middle Eastern
and Southeast Asian countries are also in close proximity.
India is connected to the sea on three different fronts by the Bay of Bengal,
Arabian Sea and Indian Ocean - a feature that aids global trade in many respects.
India’s landmass spans a total of 3.3 million square kilometers comprised of 90%
land area, and its coastline spreads over of 7,517 kilometers.
Socioeconomic strength
India has a massive middle class which is expanding at a very rapid pace. This
expansion offers a large and lucrative market for German products and services.
According to a study carried out by McKinsey in 2010, at the current growth rate
India’s average household income will triple over the next two decades and India will
become the world’s fifth largest consumer economy by the year 2025.
31
India also boasts very impressive manpower resources and is home to one of the
most developed higher education systems across the globe. The size of India’s
education system ranks third in the world, after the United States and China.
Education and Manpower
The literacy rate in India is 74%, with English being both understood and commonly
used as a medium of spoken and written communication. One of India’s biggest
assets is the enormous size of its young and working population. The proportion of
population in the working age-group 15-59 years is expected to rise from 57.7% in
2001 to 64.3% by 2026.
32
 India had 409 university-level institutions in 2008-09. The total number of
colleges is 25,990 and that of polytechnics is 1,742.

31
 Total annual enrolment for various postgraduate courses is as high as 18.6
million nationwide.
 India has 1,522 degree-granting engineering colleges with an annual student
intake of 582,000.
 The number of students enrolled each year to become doctors is as large as
273,366.
AT Kearny India FDI Confidence Index
33
Throughout India there are certain common stumbling blocks which hinder FDI: poor
infrastructure, corruption, political instability and a complicated tax system. Despite
these issues, given the immensely diverse geographic and economic climate of
India, we find a great amount of disparity in attractiveness across states. As states
often compete within one another to attract FDI, there are certain states and
sectors within India which we feel are better poised to serve and facilitate the
interests of German investment, despite the aforementioned common pool of
problems.
Our study has identified five states or regions which we feel are best suited to
sustain and advance German investments. This identification is based on the
following criteria:
 The five states must be the ones which have shown the most cumulative FDI
inflows over the last five years from 2010 to 2015.
 These five states must have a very robust infrastructure development with
respect to transportation, power and water relative to other states across the
nation.
 The five states must have a proven track record of attracting existing high-tech
manufacturing support, or they must present unique features which will
complement FDI in high-tech manufacturing.
From the perspective of a German firm which might be making their first foray into
the Indian market, it is important to familiarize oneself with the economic,
geographic characteristics and respective incentives each state offers in support of
high-tech manufacturing. The following section will provide a brief overview of these
key aspects.
YEAR FDI CONFIDENCE INDEX & RANK RANK
2015 1.79 / 2.50 11
2014 1.81 / 2.50 7
2013 1.85 / 2.50 5
2012 1.73 / 2.00 2
2011 N/A
2010 1.64 / 3.00 3

32
Recent FDI in main regions
34
German Investment In India Region-Wise (All figures in US$ million)
35
HEAD OFFICE STATES COVERED 2013-14 %OF
FLOW
2014-
2015
%OF
FLOW
Chennai Tamil Nadu & Pondicherry $570.66 50.45% $302.68 26.91%
Mumbai Maharashtra $125.84 12.1% $531.50 47.25%
New Delhi Delhi, part of Haryana &
UP
$102.85 9.90% $142.98 12.71%
Bangalore Karnataka $44.39 4.28% $48.99 4.36%
Kolkata W.Bengal, Sikkim $30.64 2.95% $8.02 0.71%
Chandigarh Punjab, Haryana,H.P. $11.7 1.13% N/A N/A
Ahmedabad Gujarat $3.71 0.36% $3.52 0.31%
Panaji Goa $0.83 0.08% $0.23 0.02%
Hyderabad Andhra Pradesh $0.73 0.07% $9.04 0.80%
Patna Bihar, Jharkhand $0.71 0.07% $1.55 0.14%
Bhubaneswar Orissa $0.67 0.06% $1.12 0.10%
Bhopal M.P., Chhatisgarh $0.20 0.02% n/a n/a
Kochi Kerala, Lakshadweep n/a n/a $0.14 0.01%

33
State Profiles and Incentives
Maharashtra
Situated along the lower west coast of India, Maharashtra is overall India’s most
lucrative FDI destination, attracting over 30% of all FDI in the nation, and attracting
the highest German FDI inflows over the last two years (FY 2013-2015).
Maharashtra is India’s third largest and second most populous state.
The state boasts a highly progressive government, taking measures to facilitate
industrial infrastructure, and serving as home to a large number of diverse industries
and a well-developed service sector. Often dubbed the “Financial and Trade” capital
of India, Maharashtra is also host to a plethora of specialized institutes that offer
skilled resources for industries and services sector.
Maharashtra has always led the country's industrial development, and it continues
to attract the largest proportion of both domestic and foreign industrial
investments. The state has established strengths in every sector, including
engineering, automobiles and auto components, chemicals, drugs and
pharmaceuticals, textiles, information technology and biotechnology. It offers the

34
finest infrastructure, excellent educational facilities, quality trained manpower, a
professional work ethic and a conducive business environment. In addition, the rich
heritage, trade, culture, history and growing economy of the state are major tourist
draws. Some key facts about Maharashtra reveal that it has:
 The largest state economy in the country
 One of the most attractive investment destinations in the country, accounting
for 27% of exports
 A high literacy rate of 77%
 12% of country‘s universities, 17% of medical colleges, 13% of engineering
colleges, 19% of management institutions
 Produced 169,000 technocrats every year
ESDM in Maharashtra & Incentives
Maharashtra accounted for a significant share (30.49%) of the industrial output of
India’s machinery, computer, electronics, optical products and equipment
manufacturing sector in 2012-13. The state’s well established ESDM hubs are
located in Pune, Talegaon and Khed. The foremost ESDM centre at Pune enjoys
excellent connectivity to the Jawaharlal Nehru Port and Mumbai Port Trust depots,
helping the state to maintain its status as an export hub for companies located
there.
A sector of great focus for Maharashtra is the government plans to set up three
brownfield Electronic Manufacturing Clusters (EMCs) at Pune, Aurangabad and Navi
Mumbai. Eight electronic manufacturing clusters have been established in the state
by the Government of India, as the Indian market for ESDM is poised to grow to
US$400 billion by 2020. All units within these clusters will be eligible for benefits
under the Modified Special Incentive Package Scheme (M-SIPS). The scheme aims
to promote large scale manufacturing, and provides incentives across the value
chain. Progressive policies aimed at improving the competitive advantage of the
Maharashtra ESDM business include:
MAJOR CITIES PROS CONS
Mumbai
Pune
Nagpur
Thane
 Most heavily invested state for German and global FDI
(30%).
 Strategically located on coastline and borders many states
 One of the lowest labor dispute states in the country
 Hub for skilled manpower (1,000+ engineering institutes,
100+ computer science application training centers, 700+
institutes for industrial manpower training
 Well connected infrastructure -7 airports (3 intl.),
dedicated freight corridor – rail, port & road.
 Particular importance given to promotion of ESDM via
setting up of 3 EMC brownfield areas and 8 ESDM
manufacturing clusters
 Maximum power distribution towards manufacturing
 High tariffs for
power and
power cuts
 Political
instability
 Tough land
acquisition laws
 High levels of
corruption

35
Fiscal Support
 Capital expenditure subsidy of 25% in non-SEZs and 20% within SEZs
 Reimbursement of CVD/excise for capital equipment for non-SEZ units
 Reimbursement of federal taxes and duties for 10 years in select high-tech units
like FABs (semiconductor manufacturing plants)
 VAT & CST abatement
 Stamp duty exemption
 Electricity duty exemption
 Fiscal incentives of up to 100% of the fixed capital investment for Ultra and
Mega projects
 10% additional incentive on top of the above-mentioned incentive is provided by
the state if the project creates double the employment required for the eligibility
Non Fiscal Support
 Skill development
 Single window clearance (SWC)
 Investor facilitation cell
 Investor aftercare cell
 Preference to domestically manufactured goods in government procurement

36
Tamil Nadu
Tamil Nadu, located in south India, is bounded on the north by Andhra Pradesh and
Karnataka, on the south by the Indian Ocean, on the east by the Bay of Bengal,
and by Kerala on the west. Tamil Nadu boasts a vibrant culture rich in history and
natural bounty in the form of many beaches and very pleasant weather. The state is
developing rapidly on all fronts - whether it is economy, social, human resource,
culture, and so on. Tamil Nadu is one of the top three Indian states in terms of FDI,
receiving the highest foreign investment in sectors like automobiles, information
technology, power, telecommunications, and others. Tamil Nadu has an enrolment
of over 182,000 graduate engineers from 553 engineering colleges, 120,000 diploma
holders from 501 polytechnic institutes, 905,000 science and arts graduates, and
over 35,000 software engineers.
36
In total, Tamil Nadu received FDI between 2014-15 of US$3.8 billion; a growth of
over 80% from FDI of US$2.1 billion registered in 2013-2014. Cumulative FDI inflows
from April 2011 to April 2015 have been recorded at US$11 billion, indicating a

37
growth of about 70% in a period of four years. Currently, Tamil Nadu is ranked #3
in terms of FDI flows accounting for 7% of total FDI in India in 2015
Among the Indian States, Tamil Nadu is now ranked:
37
 First in the number of factories
 First in the number of workers employed in the manufacturing sector
 Third in gross industrial output
 Third in net value addition
In 2014, more than 3,000 foreign joint ventures and 100 foreign subsidiaries had
manufacturing bases in Tamil Nadu, with FDI of over $ 10.0 billion. Tamil Nadu is
increasingly becoming the choice destination for foreign investors, which provides
them with a global reach. A comparison of the total operating costs across various
investment destinations in India would place Tamil Nadu ahead of the rest, and in a
very favorable position to offer investors opportunities they would find hard to
resist. Chennai serves as the most cost effective production base in Tamil Nadu for
export markets by many multinational corporations.
ESDM Incentives Tamil Nadu
Encouragement to FDI, SEZs
 100% FDI is permitted in the electronics hardware manufacturing sector under
the automatic route.
 100% income tax exemption to SEZ units on export profits for five years, and
50% for the following five years, under National Policy on Electronics.
 Modified-Special Incentive Package Scheme (M-SIPS)
 25% of capital expenditure if the ESDM unit is in non-SEZ, and 20% of capital
expenditure if the ESDM unit is within SEZ. This capital expenditure subsidy is
available for investments made within 10 years from the date of approval of the
project.
Chennai
Coimbatore
Madurai
Tiruchirappalli
 An economic powerhouse on a high growth
trajectory
 A global industrial and manufacturing hub
 Renewable energy capital of India
 Innovation and knowledge hub of India
 Robust urban and social infrastructure with
world class civic amenities
 Strong tourism footprint
 Path-breaking policy initiatives and investor
facilitation framework
 New paradigm for industrial growth
 Vision 2023 for inclusive growth and
development
 Losing out to rivals states as
an attractive destination
 Sky-high land prices due to
mass urbanization
 Lack of infrastructure outside
of main cities makes it hard
to attract migrant workers
 Lack of transparency
amongst approval processes
& delays

38
 Reimbursement of CVD/excise on capital equipment for non-SEZ units.
 Reimbursement of federal taxes and duties (like custom duties, excise duties
and service tax) for 10 years in select high-tech units like FABs, semiconductor
logic and memory chips and LCD fabrication.
EMC Scheme
 For Greenfield EMCs: Financial assistance of 50% of the project cost subject to
a ceiling of US$7.5 million for every 100 acres of land.
 For Brownfield EMCs: Financial assistance of 75% of the project cost subject to
a ceiling of US$7.5 million.
 Electronic Hardware Technology Park (EHTP) Schemes:
 An EHTP unit may import free of duty all types of goods, including capital goods
as required by it for manufacture, services, production and processing.
 EHTP provides benefits, such as duty waivers and tax incentives to companies
which replace certain imports with local manufacturing.
Semiconductor Policy
 Special incentives have been designed to attract investments for setting up
semiconductor fabrication and other micro and nanotechnology manufacturing
industries.
 The government has provided two options for setting up a project. For setting
up semiconductor fabrication units and ecosystem units in SEZs, the
government will fund 20% of the capital expenditure and for non SEZs 25% +
exemption from CVD (Countervailing Duty).

39
Karnataka
Karnataka is a state in southwest India with Arabian Sea coastlines. The capital,
Bengaluru (formerly Bangalore), is a high-tech hub known for its shopping and
nightlife. Karnataka has long been the IT hub of India and a favorite amongst the
expat community. Its capital, known as the “Garden City,” takes its name after the
lush environment and tropical weather of the state.
Historically, Karnataka is the third largest recipient of FDI in the country after Delhi
and Maharashtra from FY 2000-2015. Between April 2014 and November 2015, the
state received FDI totaling US$6.71 billion, constituting 12.04% of the country’s
total FDI.
Karnataka is the “Knowledge Hub of Asia” with 201+ engineering colleges, 114+
medical colleges/institutions, 50 universities and 13 international schools, as well as
more than 370 world renowned high-end research and development organizations.

40
The World Economic Forum has identified Karnataka among the top-four innovation
hubs in the world. Karnataka has been ranked 1st in India for a healthy business
climate and for investment attraction by World Bank's Investment Climate Index.
Incentives For High Tech Related Investment Karnataka
The machine tool sector in Karnataka forms the backbone of manufacturing
operations in various industries and is supported by a large base of micro, small and
medium enterprises (MSMEs). The machine tools sector supports key industries
such as automotive, aerospace and defense, textile, heavy engineering and steel,
etc.
Karnataka produces a majority of India's machine tools, with the Bangalore area
alone producing about 60% of the machine tools produced in India, at an estimated
value of US$324.61 million.
Another very important sector is the IT and ESDM sector, where Karnataka has a
40% share of national IT exports and a 38% share of national electronics and
hardware exports. For the period 2012-13, electronics and software represented
60% of the state's total exports. The state is home to the fourth largest technology
cluster in the world after Silicon Valley, Boston and London. Support for both
segments can be found through a variety of incentives, some of which include:
Post-performance Incentives and Subsidies
High-value-added ESDM manufacturing requires creation of Intellectual Property
(IPR) which needs to be protected in the form of patents, both in India as well as
abroad. Karnataka has a target to file 3,000 domestic and 2,000 international
patents in ESDM by 2020. The government shall reimburse up to 50% of the actual
application costs (including filing fees, attorney fees, search fees, maintenance
fees), with a maximum of US$1,503 for filing a domestic patent and up to US$7,518
for filing an international patent. This reimbursement shall be payable 75% after the
Bengaluru
Mysore
Hubli-Darwar
Mangalore
 Investor friendly single window
clearance to ensure fast track approval
for FDI
 Vibrant expat community
 Good law and order situation making it
conductive for FDI
 Provides excellent logistic support and
connectivity to investors
 Ranks among the top 5 industrially
developed states
 One of the biggest and fastest
expanding markets in the country
 Highly skilled manpower is abundantly
available. The tech hub of India
 Poor
infrastructure
(power, water,
land availability)
 Poor supply
chain
management
ecosystem
 Poor conversion
rate of promises
made to foreign
investors
 Overcrowding in
established hubs

41
patent is filed and the remaining 25% after the patent has been granted. The
patent filing incentives provided by the government of Karnataka shall be in addition
to any existing scheme of the Government of India.
Marketing Incentives to Karnataka
For export promotion of ESDM products, and to assist in building brand equity of
Karnataka ESDM companies as credible players internationally, the government
shall provide reimbursements of 50% of the actual costs (including travel) incurred
in international marketing, sales promotion, trade show participation, webinars,
market research etc. by Karnataka ESDM companies. This reimbursement will be
subject to a maximum of US$15,037 per year per company.
Deemed Export Incentives (for domestic sales)
For sales within Karnataka of ESDM products, ESDM companies will be eligible for
interest-free loans against the eligible gross VAT under the Industrial Policy 2009 –
14. For domestic sales outside Karnataka (inter-state sales), the state will reimburse
95% of Central Sales Tax, until Goods and Services Tax is implemented, paid by the
eligible ESDM units during the first 5 years of their operations.
R&D Grant
The Karnataka Government shall give R&D grants in the form of reimbursement
equaling up to 20% of the actual R&D expenses (including manpower costs)
incurred annually by Karnataka ESDM Companies, subject to a maximum of 2% of
their annual turnover. The R&D grant shall be subject to a maximum of US$150,375
per company per year, and shall be in addition to any similar benefits announced by
the Government of India.
Incentive for Capital Investment in ESDM sector
To attract investments in ESDM sector, the Karnataka Government will provide up
to 10% capital subsidy, or US$751,879 - whichever is lower - to Karnataka ESDM
companies (both for ESDM manufacturing as well as R&D units), and will be given
to the first two anchor units in each Greenfield Cluster. This incentive is intended
to act as a strong pull factor for investors to set up their ESDM design, R&D and/or
high-tech manufacturing facilities within the state.
In addition to the above, fiscal incentives and concessions as per Karnataka
Industrial Policy 2009-14 will be extended to ESDM units covered under this policy.

42
Gujarat
Gujarat is the home state of India’s present Prime Minister Narendra Modi. Gujarat
boasts a rich and varied cultural heritage that is reflected in its art, music, cuisine,
literature and religious traditions. It is India’s westernmost state and is also amongst
its most industrialized. The business reforms which took place in Gujarat over the
last half-decade became the blueprint which many states in India are now trying to
replicate. Gujarat boasts the title of being the easiest state in which to conduct
business, and is further transforming itself to compete with its peer states for
increasing FDI.
Located along 1,600 km of coastline, Gujarat is well connected to major port trading
countries and regions such as the United States, Canada, Europe, Australia and
Africa. Gujarat is the leading industrialized state of India, and it is one of the most
preferred investment destinations in India - providing opportunities in almost all the
sectors of the economy, particularly in IT, tourism, textiles and the agricultural
sector.

43
Gujarat hosts a variety of multinational corporations, private sector companies,
public sector enterprises and a large number of medium and small scale units. It is a
manufacturing powerhouse with world-class production capabilities in textiles,
petrochemicals, pharmaceuticals and agro-based products. The state is also known
for its entrepreneurial spirit, as well as for its robust social and physical
infrastructure.
Gujarat is rich in bio-resources, and it has a forest cover of 1.88 billion hectares.
Gujarat has 10.7 million hectares of highly diversified cropping area, and it is a
leading producer of horticultural crops. Moreover, the state is rich in mineral
resources like limestone, lignite and bauxite. It is also a leading producer of cement
and soda ash, and has the largest diamond processing industry in the country.
Thus, its geographic diversity and strategic location has made Gujarat home to an
incredible diversity of people.
Gujarat Incentives For ESDM
State Government Incentives for clusters and anchor units:
 Assistance of up to 25% of the project cost to greenfield EMCs, subject to a
ceiling of US$15 million.
 Special Incentive Package for two anchor units (with investments more than
US$15 million) in each of the greenfield EMCs.
Registration/Stamp duty concession
 ESDM units which intend to establish/expand/diversify will qualify for 100%
exemption in stamp duty and registration fee in lease/sale/transfer of land for
the first transaction.
 Uninterrupted availability of power & power tariff subsidy to ESDM units.
Ahmedabad
Surat
Vadodara
Rajkot
 The state provides extensive network
of railways, and has the highest
number of airports in the country
 Only state with a power generation
surplus
 Gujarat provides extensive professional
services to foreign investors
 The state is highly industrialized
 Location wise, Gujarat has a strategic
location, providing easy access to the
African, western, and Middle-Eastern
markets
 Skilled manpower is abundantly
available in Gujarat
 Poor quality of
life in cities
 Infrastructure
constraints
 Legacy of
communal strife

44
Power Tariff Subsidy
 If required, dedicated additional feeders would be provided both to the
greenfield as well as brownfield EMCs.
 Power Tariff Subsidy of US$0.015 per unit of electricity will be available for the
period of 5 years.
 Only units purchasing electricity from the state electricity/power distribution
licensee will be eligible for this subsidy. Units generating power from its captive
power plant or getting electricity through open access will not be eligible for the
subsidy.
Mega ESDM Projects
 Projects generating employment of more than 500 persons and fresh investment
of greater than US$35.57 million (excluding the cost of land) will be considered
Mega Projects. A special package of incentives will be offered on a case-by-case
basis for Mega Projects.
 The ESDM industry will be declared an essential service under Gujarat Essential
Services Maintenance (ESMA) Act. The State Labor and Employment
Department will make necessary amendments to the ESMA to include ESDM
Industry in the List of Essential Services.

45
Delhi, Haryana & NCR
The National Capital Region (NCR) is a metropolitan city and region that includes
Delhi, the capital of India, plus the surrounding urban areas in the neighboring
states of Haryana, Uttar Pradesh and Rajasthan. The NCR is India's largest - and
world's second largest - urban agglomeration, with a population of over 54 million
inhabitants. The NCR ranks behind only Maharashtra in India for attracting FDI
inflows.
Each of the three states which form the NCR boast very strong ties towards the
development of high-tech manufacturing, making the NCR a bedrock for diverse FDI
activity. Haryana, for instance, is home to more than 400 IT and ITeS companies.
Haryana produces 50% of India’s cars, 33% of its two wheelers, 80% of its
excavators and 52% of its cranes. Haryana is also responsible for being a
nationwide leader in scientific goods, sanitary ware.
38
The city of Gurgaon has
emerged as a preferred destination for the IT industry in north India. During 2011-12,
the state registered IT / ITeS exports worth US$5.2 billion.

46
The state of Uttar Pradesh (UP) is home to the largest number of engineering
graduates in the field of IT. UP’s electronics and communication field has
approximately 36 universities, 3,104 colleges, 1,500 information technology
institutes, 197 business schools and 320 engineering colleges, and is home to many
premier institutions such as the Indian Institute of Technology (IIT), the Indian
Institute of Management (IIM), the Indraprastha Institute of Information Technology
(IIIT), and the Banaras Hindu University (BHU).
39
Current policy initiatives in FDI
reflect the determination of the state government to make UP an electronics
manufacturing hub.
Delhi NCR Incentives
As the NCR is a combination of three separate states, each state brings with it
unique sets of incentives for foreign investors within their established defined SEZs.
In Delhi the sectors recognized for the establishment of SEZs comprise information
technology-enabled services, electronic hardware and software, nanotechnology,
biotechnology, gems and jewelers, non-conventional energy equipment, fashion and
garments (without dyeing) and higher technical education institutes. Industries that
present environmental issues may not be established inside SEZs and environmental
clearance is a must for all projects except those dealing with information technology
enabled services.
Other incentives offered by NCR SEZs include
 Exemption from customs and excise duties.
 100% income tax exemption on export income for SEZ units under Section 10AA
of the Income Tax Act for the first five years, 50% for the five years thereafter,
and 50% of the ploughed back export profit for the next five years.
 Exemption from minimum alternate tax, exemption from dividend distribution
tax, exemption from service tax, and exemption from central sales tax (CST) on
inter-state purchases of goods.
New Delhi
Gurgaon
Noida
Faridabad
 Capital region of India
 Geographically central and very well
connected
 Education hub
 Stable law & order
 Leader in tertiary services
 World class connectivity, infrastructure
and airports
 Local government can be
seen as unprogressive
 Most polluted city in the
world
 High land prices
 Electricity supply issues

47
Incentives For ESDM Uttar Pradesh
 The following incentives target the establishment of EMCs, and of individual
ESDM units setting up in the EMCs, within UP for period ending on 31st March,
2019. These incentives are applicable to the first three EMCs in the state, which
may further be extended to other EMCs to be decided by the empowered
committee constituted under the policy.
 A capital subsidy of 15% on fixed capital, other than land, subject to maximum
of US$750,000 shall be provided. This subsidy shall be given only to the
companies operating in EMCs and admissible on the capital evaluated by the
relevant banks/financial institutions. This subsidy shall be provided to first 10
companies on the basis of their date of commencement of commercial operation
(i.e. when the first business transaction takes place).
 An interest subsidy of 5% per annum for a period of 7 years on the rate of
interest paid on the loans obtained from scheduled banks/financial institutions
shall be reimbursed subject to a maximum of US$150,375 per annum per unit.
 100% stamp duty exemption of purchase/lease of land for the establishment of
EMCs.
 Reimbursement of up to 50% of actual filing costs subject to a maximum of
US$1,503 for domestic and US$7,518 for international patents applicable for
MSME units.
 100% tax reimbursement on VAT/CST subject to a maximum of 100% of fixed
capital investment other than land (such as building, plant, machinery, testing
equipment, etc.) for a period of 10 years. This reimbursement shall be done
through vouchers issued to the beneficiary, who shall then submit the same for
redemption claim.
 Rebate of 25% on the prevailing sector rates shall be provided either to EMC
Special Purpose Vehicles (SPVs) or the companies within the EMC on purchase
of land from state agencies.
 State Government shall provide a subsidy equivalent to 50% of the grant
provided by the Government of India under National Policy on Electronics, 2012
in terms of the cost incurred in developing infrastructure facilities (roads, power,
water, testing facilities, social infrastructure, etc.) for EMC development. This
subsidy shall be applicable for first three EMCs in the state.
40
 Industrial promotion subsidy equivalent to 50% of the incentives applicable for
new units (setting up in EMC) would be provided to existing units, if additional
capital investment for capacity enhancement to the extent of 25% or more on
the existing capacities of ESDM units is made in a period of 3 years. This
subsidy will be applicable for first 10 units to be considered on the basis of their
date of commencement of commercial operation.
Incentives In Haryana
Haryana is the home to a number of key high-tech related clusters.
 Haryana has 10 notified brownfield EMCs for the national Managed Services,
Infrastructure and Projects (MSIP) scheme

48
 Gurgaon is the Business Process Management (BPM) Capital of the World, with
5% of the global BPM workforce. Gurgaon has more than 450 IT/ ITeS units
offering employment for 253,000 people and 4,000 foreign workers
 The automotive cluster in Gurgaon and the surrounding areas produce 50% of
the cars made in India
 Gurgaon’s medical & scientific instruments cluster is the largest such cluster in
India, with over 1,200 units at Ambala
41
In order to attract and capitalize on foreign investment, the state of Haryana offers
a wide variety of incentives to foreign investors. The following processes are
excused from payment of any tax, duty, fees, cess or any other levies under any
existing state law.
 Any goods exported out of or imported into state SEZs
 Inter-unit transaction of goods within SEZs
 Goods from SEZs sent for value addition to the domestic tariff area and
returned to the SEZs thereafter
 Services that provide value addition to a product within the SEZs
ESDM & IT Support
 Relaxation in Floor Area Ratio (FAR) shall be permitted up to 100% for IT units
and in all IT parks
 The IT software industry will be totally exempted from payment of sales tax. The
applicable rate of sales tax on computers and computer peripherals shall be
reduced to 0.25%
 Special incentives have been proposed for creation of mega projects/mother
units in the ESDM sector at par with incentives proposed in extremely backward
blocks (D Category)
 50% top up infrastructure support by the state over and above those admissible
under the DEITY Scheme

49
Case studies
Seeing is believing, which is why - rhetoric and policy reforms aside - we highlight
some particularly relevant and recent successful German FDI ventures into India.
Compiled with information shared by the Indian Equity for Brand Foundation (IEBF),
we learn from these case studies the unique advantages and opportunities that
India has to offer for German investors, how they were established, the manner in
which they grew, what future plans lay in store and their keys to success. From a
German manager's perspective, the insights that these case studies offer are useful,
as they bring the vision of conducting business in India a little closer to mind from a
practical perspective. With the recent FDI reforms and a plethora state specific
incentives, we illustrate through four case studies why India is a truly attractive
destination for German investors.

50
Case Study 1 - WÜRTH
Background
The Würth Group is the world market leader in its core business: the trade in
assembly and fastening material. The group currently consists of over 400
companies in more than 80 countries, and has over 69,000 employees on its payroll.
31,000 of these employees are full-time sales representatives. According to its
preliminary annual financial statement, the Würth Group generated total sales of
€11.05 billion in the business year 2015.
42
Globally, Würth is a direct sales
organization, which services a variety of industries and sectors, and caters to their
assembly and maintenance needs. Its key divisions are automobiles, metals and
wood.
Indian operations
The Würth Group started India operations in 1994-95 after the Indian economy was
partly liberalized in Mumbai (1994). It was followed by three more companies,
Bettina Wuerth India in Kolkata (2003), Reinhold Wuerth India in Chennai (2003)
and Marion Wuerth India in Delhi (2004). In order to further strengthen and
maximize the group’s growth, the four companies merged together as Wuerth India
Pvt Ltd in January 2015. Currently the group has 41 branches spread across the
country that include sales offices and warehouses to ensure better market
penetration in close proximity to its large Indian customer base. Over the past
decade, the number of employees increased from 26 to 1,100 in 2014.
43
Initially the group was largely focused on the automobile sector, especially in the
direct aftermarket segment, which includes authorized and private garages. The
fast-growing automobiles market and the potential for aftermarket and assembly
products for the sector were the main reasons for the group to enter India.
Recently, there has been a focused approach to key account sales (i.e. OEMs), with
Tata Motors becoming a larger customer.
The product range includes fastening and connection parts, chemical technical
products, electrical, pneumatic and hand tools and retrieval systems. The group’s
expectations about India have been exceeded in recent years, encouraging them to
introduce their metal, construction, hospitality and wood product ranges in India as
well. Though the company found India challenging in the initial years of operations
due to import restrictions and low level of indigenization of products, today India is
a key growth market for the company. With the relaxation of import duties and
increased product localization, there has been a significant growth in recent years.
From the Würth Group’s perspective, within the Asia region, China is looked at as
being a high volume, low cost manufacturing location, whereas India is perceived as
relatively higher skilled with a potential for higher quality workmanship.

51
Keys to success
The Würth Group sees the keys to success in India to be the ongoing growth of
Indian economy, low manpower costs and an increasing degree of product
localization. Other important factors include the group’s ‘multiplication strategy’ and
its sales force incentive schemes. Through these policies, the group has generated
a healthy competition amongst Würth companies within the country. The
profitability of Indian operations is higher compared to other countries. As a direct
sales organization, manpower costs of the sales force personnel form a significant
proportion of its overall costs. In India, these costs are only 22% of overall costs (in
comparison, in Japan’s Würth Group companies, manpower costs account for 50-
60%). Würth feels comfortable doing business in India as India is a democratic
country with a well established banking and judicial system.
Future plans
India is perceived to be a high-growth market over the next 5 years, and significant
investments are being planned. While China received a lot of attention 5 years ago,
India is receiving similar attention today, and specific growth plans for India are
being made. The Würth Group is projecting to have employee turnover of 14,750 by
2020 in order to ensure an excellent service all over India. The plan is to grow
organically.
44
Würth: At a glance
 Started India operations in 1995-96 and currently there are 41 branches of the
Würth Group in India.
 For Wurth, India is a key growth market and Indian operations have exceeded
the parent’s expectations.
 Factors for success: Growth of Indian economy, low cost of labor and increasing
degree of product localization.
 Future plans: Organic growth, more investments and ramp up the sales force to
14,750 by 2020.
45

52
Case Study 2 - STEAG
Background
STEAG encotec GmbH, headquartered in Essen, is a wholly owned subsidiary of
STEAG AG which in turn is one of four divisions in the RAG Group. The company
has more than 60 years of experience in power generation and plant construction,
and has project experience in more than 40 countries, with around 6,400 employees
globally. STEAG encotec is a specialist in planning, construction and operation of
power plants, energy and environmental protection systems, as well as being a
supplier of related IT systems and services. The company had sales of €324 million
in 2014. Apart from STEAG’s business in power generation the group is also
involved in coal mining and trading, chemicals (under the name Degussa) and real
estate.
46
Indian operations:
STEAG encotec (India) Pvt Ltd was incorporated in the year 2001 as a wholly owned
subsidiary of STEAG encotec GmbH (Germany). Indian operations have
approximately 1,000 employees working in Delhi, Hazira and other sites. STEAG in
India has its activities spread across three areas: engineering services, operation
and maintenance of power plants and IT. The company provides inputs for
simulation of plant conditions using its software Ebsilon, as well as software to
optimize the efficiency of power plants. Its customers in India include large public
sector undertakings such as Bharat Heavy Electricals Ltd. (BHEL) and National
Thermal Power Corporation (NTPC).The company also has a strong IT division. Its
engineers and developers do software development work, not just for India, but also
its German parent.
STEAG has recognized India as a key growth market. India has planned significant
investment in power infrastructure over the next decade, and this offers
opportunities to the company for providing its services.
47
The power business
contributes to a large part of the engineering sector, and with an estimated 900
GW of unmet electricity generation demand to be faced by 2032, STEAG’s
engineering sector is likely to be a major beneficiary. The company sees its current
operations in India as a means to understand the Indian market, and as a necessary
prelude to making decisions on investing directly in power plants in India.
Keys to Success
STEAG has been leveraging its global experience in the power sector for providing
services in India. This global experience enables the company to better understand
the growing requirements of Indian clients compared to its competition, and to
provide customized solutions. Clients appreciate the company for this expertise, and
this has contributed to the firm’s success in India.
STEAG India has participated in international projects in sync with the parent
company, and benefits from the provision of key resources for their projects
including support for the IT products of its sister company STEAG KETEK IT GmbH.
The company has leveraged the skilled resources available in India, not just in its

53
operations in India but also in other foreign locations. The parent company supports
the Indian subsidiary with technical backstopping and training where necessary.
Future plans
With growth averaging 8% over the last few years, the economy of India is
booming. STEAG estimates that an advanced and reliable infrastructure could even
boost Indian growth by two additional percentage points. Because expansion of
infrastructure has been unable to keep pace with the speed of development,
however, action is urgently needed to pick up the pace. The Indian government is
planning to invest some €450 billion in its domestic infrastructure post-2015. A
major portion of the scheduled investment will go to the energy sector.
48
STEAG encotec India aims to grow in all the three segments of its operations in the
future. The company believes that India has significant growth potential which the
company can tap. It sees India as a long-term investment destination and wants be
a long-term player in the sector. STEAG’s Indian subsidiary is also planning to
integrate itself more actively with the international activities of the parent, and to
leverage its more than 60 years of experience in the power generation sector.
STEAG: at a glance
 Started Indian operations in 2001: currently there are 1,000 employees.
 For STEAG India is a high-growth market, a source for high skilled staff and a
long-term story.
 Factors for success: Leveraging global experience and the technical knowledge
of local manpower.
 Future plans: Tap into the energy demand for India, expand advisory roles.

54
Case Study 3 - ZEPPELIN
Background
ZEPPELIN MOBILE SYSTEME GmbH (ZMS) is headquartered in Friedrichshafen,
and is one of the leading shelter system manufacturers in the world. ZMS is a
descendant of Zeppelin GmbH Group, originally Zeppelin Luftschiffbau, which
manufactured airships for transatlantic travel during the period between World War
I and World War II. Apart from shelter systems, ZMS manufactures mobile medical
systems, mobile communication systems, mobile service systems, mobile de-mining
systems and vehicle bodies and special conversions. It is certified to DIN EN ISO
9001 and ANS/ASQC 094, possesses several welding approvals and various approval
certificates, including DIN 18800-7, DIN 729 and DIN 4113 for metal-active-gas
welding.
Indian Operations
Zeppelin Mobile Systems India Ltd. (ZMI), located in the industrial town of Noida is
a 74% subsidiary of Zeppelin Mobile Systeme GmbH, Germany. ZMS entered India
in 1994 as it saw significant potential in the Indian market. ZMI was formed to sell
products manufactured by ZMS, primarily shelters for telecommunications and
defense. The company was essentially a trading office for ZMS for the first three
years, obtaining orders for shelters from Indian defense public sector undertakings
(PSUs). In 1997 ZMI established a factory to supply indigenous components along
with imported panels to its Indian clients. Soon it started manufacturing complete
shelters in India. ZMI designs and commissions sophisticated polyurethane foam
based shelters and structures for the telecommunications sector and shelters for
radar for the defense sector. It is one of the top two telecommunications shelter
manufacturers in India. ZMI also deals with other products requiring the use of
polyurethane foam, such as refrigerated bodies, ambulances and mobile hospitals.
Zeppelin Silos & Systems GmbH (Friedrichshafen) acquired the Indian company
Alpha in January 2009, via its Indian subsidiary Zeppelin Systems India Pvt. Ltd.
“With this acquisition,” said Kerstin Kleemann (Managing Director of Zeppelin
Systems India Pvt. Ltd), “Zeppelin continues its successful strategy of thinking
global and acting local.”
49
As result of this acquisition, Zeppelin is now able to
offer its clients additional products and services in Zeppelin's traditional fields of
expertise, such as silos, solids handling systems and engineered solutions for
logistic operations.

55
Keys to Success
ZMI considers adherence to quality, technological support from the parent and
localizations of designs to suit the Indian environment as key reasons for success in
India. Other reasons include continuous on-time delivery and superior customer
service.
ZMS provides its Indian subsidiary complete technological support through its well-
established design center, large well-equipped facility and superior technology.
According to company sources, Zeppelin shelters come with the company’s
authenticated certification and require practically no maintenance. The company
considers superior product quality a key reason for receiving orders from all of
India’s biggest telecommunications players. Zeppelin India is an ISO - 9001-2000
Company.
ZMI manufactures shelters in India tailored to its clients’ requirements. This has
helped it attain the preferred supplier status from some of the big
telecommunications players in India like Bharti, Reliance, Hutch and Idea. Similarly,
refrigerated/insulated bodies are being manufactured as per original German design
features, but suitably tropicalized for Indian weather and road conditions.
Zeppelin’s quality and sturdy design have enabled ZMI to attract export orders as
well. Its first export order was from Kuwait, where the company won an order for
shelters despite facing competition from four other local shelter suppliers. In the
last few years, the company added Saudi Arabia, Bahrain, Maldives, Bhutan and
Afghanistan to its export list. Also, ZMI has started receiving enquiries about its
products from players in Kenya, Mali, Bangladesh and other new locations. 20% of
the company’s revenue in the year 2005 - 06 came from exports.
Future plans
ZMI plans to achieve significant growth in the domestic Indian market, in addition to
seeking new markets to Southeast Asia. The company aims to achieve growth by
introducing better technology and new products. ZMI has entered into
manufacturing insulated bodies. These bodies are suitable for carrying perishables
such as ice cream, chocolates, meat, flowers and medicines for the cold chain
industry. In addition the company plans to enter into the mobile hospitals market,
providing medical aid to far-flung villages which cannot be not served by high tech
health centers after natural disasters like the earthquakes.
Zeppelin India: At a glance
 Started operations in 1994. Currently there are 65 employees providing high
quality engineering design services for shelters, chemical, petrochemical,

56
fertilizers, oil and gas, pharmaceutical and other process industries in the areas
of process design and basic engineering, detail engineering, HSE management
and special projects.
 Factors for success: Commitment to quality, strong parent-company support,
on-time delivery, customer service and products tailored to suit client
requirements.
 Future plans: Grow in domestic Indian market as well as expand into southeast
Asian markets. Introduce superior technology for shelters and new products like
refrigerated bodies and mobile hospitals.

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