For World Bank Course

1. Investment strategy for
Manufacturing of Metro
Rail Rolling Stock in
India

2. Alpha International Private Ltd is planning to enter EMDE – India for manufacturing
& selling of metro rail coaches. Investment strategy shall include:
Problem Statement
Assessment of macro environment of India
Broad market assessment of metro rail coaches
Financial market assessment
Policy assessment
Possible challenges
Way forward
1
2
3
4
5
6

3. Implies Govt. is
progressive for building
infrastructure
Macro environment of India
104 115 126 138 152
202
295
523
2014 2015 2016 2017 2018 2021P 2025P 2031P
Estimates of GDP at Current Prices 2011-12 Series
(In INR Trillion)
Source : Annual & Quarterly estimate NAD, MoSPI
59%
12%
28%
4%
18%
-20%
Household
consumption
Government
consumption
Investment in
fixed capital
Investment in
inventories
Exports of goods
and services
Imports of goods
and services
GDP - composition (by end use)
Source: https://www.indexmundi.com/india/economy_profile.html
• Outlook for India's long-term growth is moderately
positive due to young population and corresponding
low dependency ratio, healthy savings and
investment rates, and increasing integration into the
global economy
• Services sector is the major source of economic
growth, accounting for nearly two-thirds of India's
output but employing less than one-third of its labor
force
• India is developing into an open-market economy
• One India, One Tax – Goods & Services Act in action
• Various avenues for financing – public & private
India is a stable, progressive country with fair &
transparent governance and looking for avenues
to push private sector crowding

4. Broad market assessment
Under construction metro rail project in India (In INR Cr)
High investment
potential of INR
2,676 Billion
Operational metro rail projects – 10 cities – 555 km
Under construction metro rail projects – 17 cities – 530 km
Partially approved metro rail projects – 5 cities – 188 km
Under consideration metro rail projects – 8 cities
https://urbantransportnews.com/metro-rail-network-india/
http://www.indiainfrastructure.com/reportpdf/Report-Urban-rail-in-india-april2018.pdf
https://india.uitp.org/articles/future-metro-coach-industry-in-india
• Indian economy is growing at a rapid pace & lifestyle of
people is also undergoing a change. More cities will likely
get their metro rail
• According to India Infrastructure Research, there lies an
opportunity of INR 4.3 trillion for players across sectors
such as construction, tunnel works, traction and E&M,
rolling stock, fare collection, signalling, etc.
• Limited Rolling Stock (rail car) player in India to meet
demand – Bombardier, Alstom, Bharat Earth Movers
Limited, etc.
Future demand
• Demand of 2000+ metro trains in next 5 years
• Further, various metro rail projects coming will publish
tenders in the coming years
Huge demand is expected to come in next 5 years
& setting up manufacturing site will be beneficial

5. Financial market assessment (1/2)
Tax Measures/ Cooperation
International Finance Facility
Special Drawing Rights
International institutions
Foreign Direct Investments
Internal/ External Aid
Green Funds
Debt forgiveness
Local Government funding
Private financing
Public Private Partnerships
Bond/ Debt Market
Innovative Financing
Pool of financing instruments that can
be availed by the manufacturer in India
Private financing – A Key Solution
International finance institutions plays a
critical role in building and leveraging trust
in private financing, it can be done in
following ways:
 Ensuring MDB supports of private
sector;
 Catalyzing actions, investments;
 Supporting commercially sustainable
projects;
 Reinforcing markets;
 Promoting standards in project award,
procurement, safeguards;
 Promoting gender equality

6. Financial market assessment (2/2)
https://www.marketing91.com/swot-analysis-of-banking-industry/
https://www.business-standard.com/article/markets/what-does-market-cap-to-gdp-ratio-tell-about-market-valuation-118101000249_1.html
https://tradingeconomics.com/india/net-oda-received-percent-of-central-government-expense-wb-data.html
https://www.indexmundi.com/india/economy_profile.html
India’s sources of
finance
Domestic open
equity market
• India's current
market cap of
all listed stocks
is around $2.3
trillion while the
real GDP is
$2.6 trillion
(2018) i.e.
88.46%
Taxes &
revenues
• Direct taxes,
Indirect taxes,
Others - 10.2%
of GDP (2017
est.)
Foreign Direct
Investment
• Around1.6 %
of the country's
Nominal GDP
in Dec 2018
Institutional
funding (ODA)
• It constitutes
around 1% of
GDP
Strengths
• Source of
employment & GDP
growth
• Hedge from risk
• Diversified services
• Changing from mere
savings & loan
facilitator role
Weakness
• Lack Of coordination
• Vulnerable to risk
• High NPA’s
• Can’t reach to Under-
penetrated market
• Structural
weaknesses
Opportunities
• Expansion
• Changing Socio-
cultural &
demographic factors
• Rise in private sector
banking
Threats
• Competition
• Stability of the system
• Recession
SWOT of Indian Banking Industry
India has robust capital & financial market and enjoy good reputations with multilateral/
bilateral institutions. Hence, securing funds for factory will not be challenge

7. Relevant policy assessment
Metro Rail Policy 2017, Govt. of India
• Policy aims to facilitate innovative financing, revive private investment by making PPPs mandatory, promote
transit-oriented development and provision of last-mile connectivity, and improve project appraisal procedures
Make in India Initiative, 2017, Govt. of India
• Introduced the norms to procure at least 75% of rail cars and 25% of critical equipment locally
Goods & Services Act, 2017, Govt. of India
• Fair and transparent taxation system through online mechanism, One tax – One India
Indian policies provide incentives & pushes for private sector participation. Hence, early
mover advantage can be taken

8. Possible challenges
Private companies are reluctant to invest in Metro rail projects as studies show these yield minuscule
returns – Bitter experience in PPP of Delhi Airport Line, Hyderabad metro, Mumbai metro2
Land parcels provided by Government, even at prime locations failed to invoke an encouraging response3
High capital intensive projects and never yield an investment return of more than 2-3%. It’s the
government’s responsibility to take risks and not a private business exercise1
Low cost debt funds/ concessional funds are not directly available to private players – making project
unsustainable4
GST on rolling stock has anomaly, there is no balance between the incoming and outgoing GST5

9. Way forward
Indian Government should become guarantor so that private sector avails concessional funds from
multilateral/ bilateral institutions & from domestic resources
Anomaly of GST be addressed
Government must give incentives to private player to setup factory – such as tax holiday, land at
concessional rates, advance purchase agreement, etc.
Level playing field to private player
It can be seen that Indian political, financial, demographic environment presents perfect
landscape to manufacture metro rail coaches for domestic consumption and late on can
export worldwide & the venture will be sustainable
Other measures to be taken by Govt. of India - provide adequate infrastructure, services, unlock financing
opportunities for public-private investments

10. Thank you