The document provides a comprehensive overview of doing business in India, including its geographical, demographic, political, and economic profiles. Key market sectors highlighted include aerospace and defense, automotive, health sciences, and power, each indicating significant growth and foreign investment opportunities. Additionally, it discusses the increasing trade relations between India and the United States, particularly focusing on Ohio's export growth to India.

1. 1

2. DOING BUSINESS IN
INDIA
Prem Behl
Managing Director
Ohio India Office
2

3. INDEX
1. India: Country Profile
-Geographical Profile…………………………………………………………………….04
-Demographic Profile…………………………………………………………………….08
-Political Profile…………………………………………………………………………….10
-Economic Profile………………………………………………………………………….11
2. Key Sectors & Market Opportunities
a. Aerospace & defense……………………………………………………………….20
b. Automotive …………………………………………………………………………….24
c. Heath Sciences…………………………………………………………………………28
d. Power (Cleantech & Utilities)……………………………………………………32
3. India-US Trade…………………………………………………..36
4. Conclusion: Doing Business in India…………………..42
3

4. COUNTRY PROFILE
INDIA
4

5. Geographical Profile
• Total Area : 3.3 million sq.
km.
• World‟s 7th largest nation
• 28 states and 7 union
territories
• Bordering countries: China
Nepal, Bhutan, to the north,
Afghanistan and Pakistan to
the north-west, Myanmar
and Bangladesh to the east
and Sri Lanka to the south.
5

6. Geographical Profile
Climate Broadly classified as tropical monsoon. The country
has four seasons-summer (March-June),
monsoon(June-September), post-monsoon
(October-November), winter (December-February)
Natural Coal (fourth largest reserves in the world),
resources manganese, bauxite, iron ore, mica, chromites,
diamond, limestone, titanium ore, natural gas,
petroleum, and arable land
6

7. Geographical Profile
Flora and More than 47,000 species of flora and fauna
fauna and more than 89,000 species of fauna are
found here
Major Ganga, Yamuna, Brahmaputra, Godavari,
rivers Krishna, Cauvery, Narmada, Tapti
Coastline The coastline comprises of 7,517 km
encircling the mainland, the Andaman,
Nicobar and Lakshadweep islands.
7

8. Geographical Profile
Transportation
Railways 108,706 km
Roadways 4,200,000 Km
Waterways 14,500 km
Number of airports 454
8

9. Demographic Profile
Population 1.2 billion (urban:30%, rural: 70%)
Worlds 2nd most populous nation
Population 1.6% per annum
growth rate
Birth rate 20.97 (births/1,000 population)
Death rate 7.48 (deaths/1,000 population)
9

10. Demographic Profile
Life expectancy 66.8 years
Sex ratio 940 females per 1,000 males
Literacy rate 74.04%(male: 82.1%, female: 65.5%)
Languages Hindi is the official language of India. Apart
from Hindi, there are 21 official languages in
the country.
Religions Hinduism, Islam, Christianity and Sikhism are
the four main religions in India. Other religions
are Buddhism, Jainism, Judaism and
Zoroastrianism.
10

11. Political Profile
• India is a secular state and the largest democracy in the world with a
parliamentary form of government.
• The President of India is Smt. Pratibha Patil
• Currently, the Government of India is led by the United Progressive Alliance
(UPA) under Prime Minister Dr. Manmohan Singh.
Government of India
Legislative Executive Judiciary
Rajya Supreme
Sabha President
Court
(Upper
House) Vice
High Courts
President
Lok Sabha
(Lower Prime District
House) Minister Courts
11

12. Economic Profile
Economic reforms began in
1991. Today, the Indian
economy is characterized by:
• Liberalized foreign
investment and trade policy.
• Significant role being played
by the private sector and
deregulation.
12

13. Economic Profile
• India has grown to become a trillion dollar
economy :
- Self-sufficient agricultural sector.
- Diversified industrial base.
- Stable financial and services sector.
13

14. Economic Profile
• The Economy of India is:
- 9th largest in the world by nominal GDP $1.846
trillion
- 3rd largest in PPP terms at $4.469 trillion
• GDP has been growing at an average rate of 8.6% for
the last 5 years.
• The country's per capita GDP :
-Nominal was $1,527
-PPP was $3,703 in 2011, making it a lower-middle
income economy.
14

15. Economic Profile
Domestic consumption fuelling economic growth:
• India has been and continues to be relatively
insulated from external shocks due to its strong
domestic consumption pattern
• Consequently, India was relatively unaffected by
the global recession in 2009, recording a GDP
growth rate of 6.8%
15

16. Economic Profile
Domestic consumption fuelling economic growth:
•Increasing urbanization and modern technology
have brought about a remarkable change in the
lifestyles and consumption pattern of Indians.
•Private domestic consumption accounts for more
than 50% of the country‟s GDP and is one of the key
factors driving overseas investments in the country.
16

17. Economic Profile
India's GDP is 8.5% for FY11 and is projected to be 8.7% for
FY12
17

18. Economic Profile
FDI in India:
• India is the second-most attractive destination for
FDI (after China) in the world. Source: UNCTAD‟s
World Investment Prospects Survey 2010-2012
31.5%
18

19. Economic Profile
• Mauritius has been the largest source of
FDI inflows into India for many years.
19

20. Market Opportunities in India
KEY SECTORS
20

21. Aerospace and Defense
Sector Overview:
•India is the world‟s 9th largest civil aviation market in the
world and ranks 4th in domestic passenger volumes (45.3
million)
•India‟s national budget for 2011-12 pegged the defense
outlays at US$ 36.54 billion. Of this capital expenditure,
which primarily caters to acquisition of defense hardware
and modernization requirements of defense services,
accounts for US$ 15.38 billion.
21

22. Aerospace and Defense
Sector Overview:
•The Indian military is expected to spend roughly
around US$ 80 billion over the next four to five
years.
•It ranks among the top 10 countries in the world
in terms of military expenditure.
•India is one of the largest users and importers of
conventional defense equipment.
22

23. Aerospace and Defense
Foreign direct investment:
The policy for foreign direct investment (FDI) in
the defense sector is up to 100% for Indian
private sector participation, with FDI permissible
up to 26%, both subject to licensing and GoI
approval.
23

24. Aerospace and Defense
Outlook:
Aerospace and Defense Industry growth is
driven by factors:
• Progressive policy changes initiated by the
Government of India (GoI) to modernize and
develop its aerospace and defense industry
• Cost advantages
• Talent base
• IT competitiveness
24

25. Automotive
Sector Overview:
• India is the world‟s largest three wheeler, second-
largest two-wheeler and seventh largest car market in
the world.
• The Indian automobile industry is estimated to have a
total turnover of US$ 73 billion for the year 2010-2011.
•In 2010-2011 the total number of vehicles
manufactured in India were: 17,916,035.
•Exports of vehicles have grown at a CAGR of 25% over
the period 2007–11.
25

26. Automotive
Sector Overview:
•India proximity to the south-east Asian and African
markets makes it an ideal location for small vehicle
manufacturing.
• India ranks fifteenth in the world in availability of
engineers and scientists.
•The cost of manpower is also 20%–40% cheaper than
counterparts in America.
•Automotive OEMs, tier-I suppliers are viewing India as a
sourcing base with more than 35 International Purchasing
Office in the country operated by various multinational
players and component suppliers, to source components.
26

27. Automotive
Foreign direct investment:
•FDI of up to 100% is allowed under the automatic
route.
•200% weighted deduction on R&D expenditure.
•Most state governments offer additional incentives to
vehicle manufacturers, in order to encourage them to
set up manufacturing units in their respective states.
27

28. Automotive
Outlook:
•India is the second-fastest growing vehicle market in the world:
-Primarily due to the rising personal disposable income and a
growing middle class.
-The number of households in the middle income group is expected to
rise to 170 million by 2015 providing immense scope for growth in
the passenger car density, which is currently 11 per 1000 people
-The increasing working population, favorable government policies
and availability of low cost finance were the key drivers of domestic
market growth.
-India is poised to become one of the top five vehicle producing
nations.
- By 2020, vehicle production is set to treble from 2009 levels and
the size of the component sector is set to grow from US$ 30 to
US$ 110 billion.
28

29. Heath Sciences
Sector Overview:
•The Indian life sciences industry has evolved
tremendously, with pharmaceutical, biotechnology and
health care domains driving growth in the sector.
• The growth of the country‟s healthcare sector in the
recent years is due to:
- Large population
- Evolving patient demographics
- Increasing healthcare expenditure
-Growing urbanization
- Increasing disposable income
-Private sector participation
29

30. Heath Sciences
Sector Overview:
• India is the 3rd-largest pharmaceutical market in the world in
terms of volume and 14th in terms of value.
• The domestic pharmaceutical market size is estimated at US$
12.76 billion in 2010 and is expected to grow at a CAGR of 9.5% till
2015.
• Indian biotechnology sector was valued at US$ 4 billion in 2010-
11.
• The Contract Research and Manufacturing Services(CRAMS) sector
is valued approximately at US$ 7.6 billion in 2011-12 and has
grown at a CAGR of 47.2% from 2007 to 2012
• The Indian medical equipment and supplies market in 2010 was
estimated at US$ 3.6 billion and is estimated to reach US$6.41
billion by 2014 at a CAGR of 15.5%
30

31. Heath Sciences
Outlook:
The key factors contributing to the growth of the Indian health
care market are:
• Rise in the number of middle class households with
increasing levels of disposable income
• Demand from the urban middle class for better healthcare
services
• Changing disease patterns: It is estimated that by 2012, 50
percent of the spending on in-patient beds would be on
lifestyle related diseases associated with the increasing levels
of urbanization
31

32. Heath Sciences
Outlook:
• Substantial demand from high quality and specialty
healthcare from tier II and tier III cities.
• Increase in Government spending on healthcare: The
Union Government has allocated US$ 5.6 billion in
2011-12 on healthcare, an increase 11% from the
previous fiscal year.
32

33. Power
(Cleantech & Utilities)
Sector Overview:
• India‟s power generation capacity, as on 31 May 2011 is
estimated at around 174.9 Giga Watt (GW) (excluding captive
power generating capacity of 19.5 GW), with the private
sector contributing just over 21.8% of the installed capacity.
Source: Ministry of Power
- Coal, gas and diesel fuel-based thermal power plants
form a major portion (65%) of the installed capacity,
accounting for nearly 113.9 GW of the total installed
capacity in the country.
- The share of renewable energy in the installed capacity
increased from 3% in 2002 to around 11% in 2010.
33

34. Power
(Cleantech & Utilities)
Sector Overview:
•The total quantum of power generated in the
country has increased from 704.5 billion units (BU) in
FY07–08 to 788.4 BU in FY2010–11, recording a
growth rate of 3.8% in the last four years.
•At the end of FY11, the total electricity peak demand
met was only 110.26 GW, resulting in a peak deficit of
9.8%, while the electricity energy availability was
788.4 BU, which has resulted in an energy deficit of
8.5%
34

35. Power
(Cleantech & Utilities)
Foreign direct investment:
• The power sector enjoys a favorable regulatory
environment.
•FDI of up to 100% in all power sector segments
(excluding nuclear)
35

36. Power
(Cleantech & Utilities)
Outlook:
• The sector recorded highest ever capacity additions in 2010-11
of around 16 GW. These additions were made mainly across
hydro and thermal projects
• The Government of India released US$ 889 million toward
Accelerated Power Development and Reform Program (RAPDRP).
-Out of these around US$ 867 million will be disbursed to
state utilities as loans and the remaining will be given out
as grants.
• The government‟s independent transmission projects initiative,
along with related state initiatives, is expected to open new
opportunities in the transmission BOT sector, thereby attracting
both Indian and international developers.
36

37. Prospects for Export Growth
INDO-US TRADE RELATIONS
37

38. US-India Bilateral Trade
• Bilateral trade grew at a CAGR of 11.69% between 2006-10
• Indo-US trade of all products amounted to US$ 44.7 billion in 2010
and US$ 57.7 billion in 2011
India-US Bilateral Trade 2009-2011 (figures in US$ billion)
70
60 57.78
50
44.78 36.16
40 37.6
Exports to
25.53 India
30
21.16 19.25 21.62
16.44 Imports from
20
India
10 Total Bilateral
Trade in Goods
0
2009 2010 2011
• Bilateral trade of products and services is expected to touch a record
US$ 100 billion in 2012
38

39. US-India Bilateral Trade (US Exports)
39

40. US-India Bilateral Trade (US Imports)
Percentage Share of Major Items Exported from India to
USA
Iron & Steel Products,
Electrical 3.4%
Machinery, 4.0%
Machinery,
4.8%
Textiles,
Organic 17.7%
Chemicals, 5.1%
Pharmaceutical
Products,
8.6% Precious Stones &
Metals,
22.0%
Mineral
Fuel, Oils, 10.9%
40

41. Ohio-India Trade
Growth in Ohio’s Exports
•India emerged as Ohio‟s 12th largest export market in
2010
•Ohio‟s exports to India have grown by almost 50%
from US$ 380 million in 2009 to US$ 566 million in
2010
41

42. Ohio-India Trade
Ohio’s Top Exports to India
•Industrial Machinery: $ 253 million
•Electric Machinery: $ 49.4 million
•Optic/Medical Instruments: $ 41.2 million
•Plastics and Articles thereof: $ 36.5 million
•Aircraft and Spacecraft: $ 29.4 million
•Pearls, Stones, etc.: $ 24.2 million
•Miscellaneous Chemical Products: $ 17.1 million
•Articles of Iron or Steel: $ 14.8 million
•Iron and Steel: $ 13.3 million
•Dye, Paint, etc.: $ 8.8 million
42

43. India: An Growing Market for Ohio Companies
CONCLUSION
43

44. Conclusion
• Purchasing power growth in India along with advances in
technology and an increasing focus on quality are factors
which make India a favorable market for overseas players
• India has emerged as the 12th largest market for Ohio‟s
exports
• Growth in spending in Indian sectors such as healthcare and
medical equipment, aerospace and defense and clean energy
provide good export prospects for Ohio companies
44

45. Report prepared by:
Ohio India Office
45
Date: 23-02-2012

46. Understanding the Indian Culture:
Hofstede Framework & Study Abroad Experience
Presented by: Adrian Inkrott, Amanda Purdy, Andrew
Glotfelty, Cory Miles, Jacqueline Fries-Gomez, Jeremy
Espinoza, Lauren Mathias, Sakiko Okuma, Shoayb Bascal
Faculty Advisor: Dr. Ghose and Professor Gamba

47. About UF
The University of Findlay (UF) is one of the largest and most diverse private
educational institution’s in Northwest Ohio
• UF’s College of Business has partnership programs with local corporations
– Unique emphasis on international business majors
– MBA program that draws students from different countries; i.e. India
• Top tier of U.S. News & World Report’s “America’s Best Colleges” in the Midwest
• “Best Midwestern College” by the Princeton Review for the past four years
• Professionally qualified professors
- Real-world international experience

48. Governor’s ‘Excellence in Exporting’ Award
• Recipient of 2009 (e-award)
• UF is the second private university to have won the E-Award
• UF is one of only five organizations in Findlay, OH to have received the award

49. Hofstede Framework
 Theory pioneered by Dr. Geert Hofstede
• The most comprehensive studies of how values in the workplace are
influenced by culture
• Paradigm used by numerous researchers
 Model of cultural dimensions (five sub-categories)
• Hofstede analyzed a large data base of employee values, scores collected
by IBM between 1967 and 1973 covering more than 70 countries
- The results found clear patterns of similarity and difference amid the
responses along these dimensions
 Cultural differences
• Between nations are found on the deepest level; i.e. on the level of values
• Among organizations are identified on the level of practices
*Source: geert-hofstede.com

50. Power Distance – U.S. vs. India
 India – 77  United States – 40
• High ranking • Low ranking
• Large gaps • Equality among ranks
- Compensation - Supervisors
- Authority - Employees
- Respect
Not reflected as an objective difference in power distribution, but rather
the way people perceive power differences.

51. Individualism
 India – 48  United States – 91
• Focus on long term • Highly individualistic
relationships
• Look after ones self and
• Low job turnover immediate family
• Often hire based on friends • High graphical mobility
and family
• Not shy
• Prepare to be asked personal
• Employees take initiative
questions
• Merit based hiring and
• Reward and recognize the
promotion
entire team, not just
individuals

52. Masculinity vs. Femininity
India – 52 United States – 62
High ranking, high degree of gender differentiation. Males dominate a
significant portion of the society and power structure.
A low ranking, low level of differentiation, discrimination between
genders. Females are treated equally to males in all aspects of the
society.
 Masculinity  Femininity
• Competition • Cooperation
• Achievement • Modesty
• Heroism • More consensus-oriented
• Material reward for success

53. Uncertainty Avoidance
 India – 40  United States – 46
Low UA societies (India and United States)
•More relaxed attitude to uncertainty and ambiguity
•More tolerance for a variety of opinions
Uncertainty Avoidance dimension is the degree to which the member’s
of a society feel uncomfortable with uncertainty and ambiguity.

54. Long-Term vs. Short-Term Orientation
 India – 61  United States – 29
• Enduring culture • Short term oriented
• Thrifty and persistent • Focus on traditions and filing
social obligations
• Sense of shame in regards to
status • Measure performance on
short term basis
• Remain at one job much of
life time - Quarterly profit/loss
• Quick results
• Absolute truth

55. Ohio Energy Industry
 Largest Industry is Oil and Gas related
• Contributed $1.5 billion to gross state product in 2008
 More than 7,500 employed by advanced energy manufacturers
 Leading the U.S. as component supplier for wind turbine original equipment
manufacturers
 Lucky number 7
• 7th largest coal reserves in the U.S.
• 7th largest producer of biomass and biofuel related goods in the U.S.
 2nd largest solar manufacturer in the U.S.
• 1,500 employed in our solar energy industry
*Source: nccet.com

56. Ohio Aerospace Industry
• “Birthplace of Aviation”
• Accounts for 15,200 employees in manufacturing
• Over 120 companies involved in the industry
• Top leader in aircraft engine manufacturing
• Top leader in educating highly skilled workers
– 11 schools of engineering in Ohio
*Source: Ohiomeansbusiness.com

57. India’s Energy Demand (Current)
 Ranks 3rd in the world of energy consumption
• Over a third of the populous has no access to the grid
 Coal meets more demand than any other resource at 40%
• India is the 3rd largest producer of coal in the world
• Coal imports rose roughly 20% in 2010
 Oil meets roughly 25% of Indian energy needs
 Is the 5th largest market for wind energy in the world
 Per capita energy consumption is still low compared to developing countries

58. India’s Energy Demand (Future)
 Government hopes to reduce reliance on imports
• Projected to reach 53% of the supply of energy in India (currently at 30%)
• Encouraging more efficient supply sources
- Particularly nuclear, planning to start build 18 nuclear plants by 2025
 55% of rural population has no access to electricity
• Government-led initiative is called REC
 Government is also encouraging alternative sources of energy
• Primarily wind and solar through the use of tax breaks
• Projected to move from 10th to 3rd in G20 countries in clean power
investments
• 100% FDI is possible in renewable energy sector

59. India’s Aerospace Demand
 Like the rest of India, industry is growing rapidly
• Civil aviation has grown at a rate of 41%
• Boeing has projected demand for $100 billion worth of commercial
aircrafts
• Estimate growth in repairs and parts market expected to grow at 10%
annually
 Government support
• There is no duty on imports of aerospace related products
• Current cap of 26% on FDI in defense sector but this appears to be
loosening

60. 60

61. Preparing for Success in India –
A Legal Perspective
Presented by Vinita Bahri-Mehra, Esq.
February 23, 2012
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62. w w w . k e g l e r b r o w n . c o m

63. Why India?
• India is the 4th largest economy in the world as measured by
purchasing power.
• India has a consumer base of 1.2 billion people.
• The youngest population of the world – hence sustainable, long term
growth is assured.
• Modern (organized) retail converging with the consumption boom will
open up many opportunities for small and mid-size consumer
companies.
• Rapid growth in the number of middle class consumers.
• Eager and savvy consumer market with growing buying potential.
w w w . k e g l e r b r o w n . c o m

64. India’s FDI Regime
• 100% foreign investment permitted in most sectors on automatic basis except:
– Banking (74%).
– Telecom services (74%).
– Civil Aviation (49%).
– Insurance (49%).
– Retail trading: New – Single Brand up to 100% . Multi-Brand – Not allowed.
– 100% FDI is allowed in cash and carry wholesale formats, B2B sales.
• Certain sectors where FDI is prohibited:
– Atomic Energy.
– Lottery business, Gambling and Betting.
– Agriculture
– Railway Transport
– Arms and Ammunition
– Coal and Ignite
• Certain sectors where there are minimum capitalization requirements:
– Non-banking financial services activity (certain activities – fee based and fund based).
– Real estate construction and development projects.
w w w . k e g l e r b r o w n . c o m

65. Potential Investment Opportunities
Information Technology
 Software and Services - $50 billion
 IT-enabled Services - $17 billion
 E-Commerce - $8.9 billion
Biotechnology
 $4.5 billion by 2010
Retail
 $300 billion by 2010
Healthcare
 $16 billion potential
Energy
w w w . k e g l e r b r o w n . c o m

66. Markets with Significant Export Potential
 Airport and Ground Handling  Mining and Mineral Process
Equipment Equipment
 Computers and Peripherals  Oil and Gas Field Machinery
 Education Services  Pollution Control Equipment
 Electric Power Generation,  Safety and Security Equipment
Distribution and Transmission
Equipment  Telecommunications Equipment
 Machine Tools  Textile Machinery
 Medical Equipment  Water Treatment
w w w . k e g l e r b r o w n . c o m

67. Structuring Investments – FDI
Liaison Office
Operate as a Foreign
Company
Branch Office
Strategic Investor Project Office
Operate as an Indian
(FDI)
Company
Joint Ventures
Private
Acquisition of Wholly owned
shares/business Subsidiary
assets of an existing Public
Investing Indian Company
in India
Invest in a U.S. company with a services
fulfillment subsidiary in India
Invest in a Caymans or Mauritius company
Financial Investor
with a services fulfillment sub in India
(FII or FVCI)
Direct investment in an India company from
outside India (Mauritius/Singapore subs)
Direct investment in an Indian company from
outside India through a venture capital fund
registered with the SEBI
w w w . k e g l e r b r o w n . c o m

68. Other Entry Routes
A. Direct Sales from U.S. (using freight forwarder).
Key considerations:
•Use accurate Incoterms 2010 for international sale or, even better, spell out in detail
who is responsible for what.
– Most common terms:
– EXW, FOB, CIF, DDU, DDP
•Payment Terms
• NOT Incoterms!
• The Incoterms generally indicate WHAT must be paid by each party not WHEN it
must be paid.
• Do not confuse liability with responsibility.
w w w . k e g l e r b r o w n . c o m

69. Other Entry Routes
• Payment Terms
– Usually determined in the purchase contract
– Major options, based upon increasing risk
• Paid in advance (if exceeds 100,000 additional criteria to be fulfilled and imports
to be made in 6 months).
• Letter of credit (must adhere to UCPDC).
• Documents against payment.
• Open account (remittance against imports should be completed no later than 6
months, except for payments withheld for guarantee performance, disputes,
etc.)
• Interest on import bills allowed if overdue for less than 3 years at rate
prescribed for trade credit from time to time.
w w w . k e g l e r b r o w n . c o m

70. Other Entry Routes
• Decide on-Who is the “importer of record”?
• Exporting directly can suit high value products or services. However, winning
new customers is likely to require significant investments in building relations
and several visits.
w w w . k e g l e r b r o w n . c o m

71. Other Entry Routes
• Import/Export Process and Timeline:
(Assumption: standard container of goods to a large city port in India.)
• India stands at 109 ranking of 183 economies on the ease of trading across borders.
• Indicator.
– Number of Documents to export (e.g. bill of lading, export declaration forms, commercial
invoice): 8
– Time to Export: 16 days
– Cost to Export: $1095 per container.
• Procedures to Export
– Document Preparation: 8 days
– Custom Clearance: 2 days
– Ports and Terminal Handling: 3 days
– Inland Transportation: 3 days
w w w . k e g l e r b r o w n . c o m

72. Other Entry Routes
Key Considerations: All U.S. exports are subject to U.S. export control regulations.
• BIS/EAR 2011 rules and regulations implementing changes to Export Controls on India
(“Final Rule”)
– Final rule adds India to country group A:2; the group consisting of countries adhering to Missile
Technology Control Regime.
– Results in elimination of license requirements to export or re-export certain controlled products
(i.e., classified as EAR99) to India.
– However, no unlicensed exports to prohibited parties or for prohibited end-users.
– Final rule does not impact license requirement for export of defense articles to India subject to
jurisdiction of ITAR and Arms Export Control Act.
w w w . k e g l e r b r o w n . c o m

73. Other Entry Routes
Key Considerations: Labeling and Marking Requirements
• Labeling is an important element for products being exported to India. All
packets or even containers should carry pertinent declarations.
• English or Hindi is the favorable language for labeling.
• Custom authorities have to ensure that all pre-packaged commodities
(especially those intended for direct retail sale) have all the legally required
information before they enter the retail market or sold for consumption.
w w w . k e g l e r b r o w n . c o m

74. Other Entry Routes
Key Considerations: Import Tariffs
• Peak rates reduced from 350% (June 1991) to an average 10% currently for
some products.
• India‟s tariffs still very high --– range from 0% - 150% based upon classification
of goods in accordance with Harmonized System or HS.
• Exports to India are zero-rated for VAT. All import and export of goods to/from
India are exempted from sales tax.
• Types of custom duties:
w w w . k e g l e r b r o w n . c o m

75. Other Entry Routes
– Basic Customs Duty (BCD): This duty is levied either as 1) a specific rate based on the unit of
the item (weight, number, etc.), or more commonly, 2) ad-volorem, based on the assessable
value of the item. In some cases, a combination of the two is used.
– Additional Customs Duty (ACD): This duty is typically referred to as Countervailing duty or
(CVD) and is levied on the assessed value of goods plus BCD. It is payable only if the imported
product is such as if produce in India it would be liable for an excise duty.
– Special Additional Customs Duty (known as Special CVD): Special CVD tax is applicable on
all items (to offset the disadvantage to like Indian goods due to high excise duty on their input). It
is levied at the rate of 4 percent of the BCD and the ACD on all imports.
– [Anti-dumping Duty: This is levied on specified goods imported from specified countries,
including the United States, to protect indigenous industry from injury.
– Safeguard Duty: The Indian government may by notification impose a safeguard duty on
articles after concluding that increased imported quantities and under current conditions will
cause or threaten to cause serious injury to domestic industry.]
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76. Other Entry Routes
– Customs Education Cess: Effective, 2004, India introduced a new education cess (duty)
assessment. The current rate is 3 percent of BCD and ACD.
– Customs Handling Fee: The Indian government assesses a 1 percent customs handling fee
on all imports in addition to the applied customs duty.
– Total Duty Payable = BCD + ACD + Special CVD + Education Cess + Customs Handling Fee.
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77. Other Entry Routes – Associated Taxes
• Dividends declared can be repatriated freely through an authorized
Indian bank.
• Dividends are tax-free in the hands of shareholders.
– A distribution tax of 16 % is payable by company.
• Corporate income tax rate for foreign companies is 41.2%. For
domestic companies, 30.99%.
• Withholding tax on royalties/technical fees/interest income.
– Domestic tax law – 10%.
– Indo-US DTAA – 10% for right to use of any industrial, commercial
or scientific equipment.
– 20% in any other case.
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78. Taxation in India
• The tax rate provision of domestic law could be utilized as it is less
than DTAA.
• Service tax rate is 10.3%.
– Computed on the “Gross Amount” charged by the service provider.
• Sales tax rate (CST & VAT). Varies from state to state, depending
upon classification of goods. Varies from 0% to 12.5%.
• Tax incentives are available during a limited time for 100% Export-
Oriented Unit, under Software Technology Park Scheme and Special
Economic Zones Units, etc.
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79. Taxation in India
• Elaborate Transfer Pricing Regulations
• These rules govern minimum profit margin to be maintained by the
Indian companies in transaction associated enterprises.
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80. Other Entry Routes
B. Technology Collaborations and Trademark License
• Foreign entities can provide technical know-how and/or license their trademark to
Indian companies against payment of fee and royalty.
• Key considerations.
• Protection of Intellectual Property.
• Registration of trademarks, copyrights and patents (“first to file” – jurisdiction).
• Trade Secrets: No statutory protection of trade secrets or confidential information.
However, several court precedents enforce confidentiality agreement through mandatory
injunctions.
• Indian IP laws do not provide for automatic assignments.
• Advantage of lower withholding taxes on royalty income stream.
w w w . k e g l e r b r o w n . c o m

81. Other Entry Routes
C. Agency Relationship:
• Creation:
– Relationship between Agent and Principal is primarily contractual in nature and governed
by terms of contract entered into between them.
– The Indian Contract Act, 1872 (Act) provides the framework of rules and regulation that
govern formation and performance of an agency contract.
– NO WRITTEN CONTRACT---- One may be implied, provisions of Chapter X of the Act (i.e.
agency law) will provide the framework for governance of performance of the relationship.
– Agency contract should contain limitations, termination events, territory, products or
goods, commission structure and time of payment.
– Depending upon conduct of the parties----exclusivity can be presumed.
w w w . k e g l e r b r o w n . c o m

82. Other Entry Routes
• Termination:
– If Agency is fixed for a term, it can be terminated before the expiring of the term in
accordance with an express reservation in the contract or for sufficient cause.
– Reasonable notice must be given of termination without case.
– Right to indemnity and/or the right to compensation to the Agent in the event of termination
of the agency contract is subject primarily terms and conditions of the agency contract.
– Unless the contract provides payment or full indemnity, the indemnity payable to the Agent
is generally equitable.
– No limitation on amount of indemnity/compensation to which an Agent is entitled – it is the
Court, which determines the amount of indemnity/compensation that may be paid.
– However, Agent needs to prove he has actually incurred a loss or that loss is eminent.
w w w . k e g l e r b r o w n . c o m

83. Other Entry Routes
– Right to indemnity under agency law entitles an Agent to the following:
 Commission remuneration and all expenses incurred.
 Right to lien over Principal property – received by Agent, until amount due to Agent for
commission, disbursements and services in respect for same has been paid.
– Statute of Limitation:
 Agent must bring a suit for claiming compensation and indemnity within a period of 3 years from
the date of cause of action.
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84. Other Entry Routes
C. Distributor/ Franchisee Relationship:
• Relationship between Distributor/Franchisee & Principal is contractual in
nature and governed by the terms of the contract.
• No specific law in India which governs the payment of
indemnity/compensation to the Distributor/Franchisee and it is open to parties
to determine the conditions and amount of compensation.
• Avoidance of Permanent Establishment (“PE”) status is critical.
• Restrictive Covenants (i.e. non-compete and non-solicitation) difficult to
impose post-termination/expiration of the agreement.
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85. Contract: Enforcement In India
• Legal Jurisdiction: Drafting choice of law and forum
provision is crucial.
• Remember, certain issues may be subject to a law different
from one agreed upon by parties. For example: IP
transfer, registration, protection in vendor territory, real
estate, labor laws, bankruptcy, enforcement of foreign
judgment/award.
• If the parties want to quickly end disputes arising from the
contract, an arbitration clause is necessary to avoid lengthy
civil procedures.
w w w . k e g l e r b r o w n . c o m

86. Contract: Enforcement In India
• Practical Tips:
– Negotiations: Contract negotiations can be expected to go more
slowly in India – particularly if dealing with India bureaucracy.
– Different Approach to Communication: Indian parties may not
disagree with you directly about contractual issues. Instead, they
may suggest that the matter be discussed at another time or find
some way to avoid an outright negative response.
– Flexibility: It is recommended that U.S. companies build
considerable flexibility into their approach so that prices and other
contract conditions can be adjusted.
– Believe: Relationships and respect. Building a lasting and trusting
relationship is very important for a successful business venture in
India.
w w w . k e g l e r b r o w n . c o m

87. Practical Advice: Identify the Obstacles
• There are some internal barriers that might provide
obstacles in doing business or establishing business in
India. It is necessary to be cognizant about them in order to
be well prepared. For example:
– Corruption.
– Infrastructure mess.
– Surfacing of stringent Corporate Governance/Corporate Social
Responsibility.
– Slow Reform Process.
w w w . k e g l e r b r o w n . c o m

88. Things to Ponder
• Have knowledge of Indian business and market – Evaluate Product Strategies
and related Pricing.
• Analyze and identify the region/state most appropriate for your business
needs.
• Do Business in India…the Indian Way: „Think Global, Act Local‟
– The Indianized Chinese
– Kellogg's – no to cold cereals?
– KFC – Tandoori Chicken preferred to the „KFC experience‟
– McDonalds – „McVeggie Burger‟ & „McAloo Tikki‟
– Domino‟s – „Pepper Paneer‟ & „Chicken Chettinad‟
– Pizza Hut/Pizza Express – spicing it up
• Due Diligence is the Key.
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89. Legal Advice
• This presentation is designed to provide an overview of a
number of legal principles and considerations.
• As each legal issue is fact dependent, this presentation
should not be used or viewed as legal advice, and your
legal counsel should be consulted on the application of
your particular factual situation to the current law.
• Copyright: 2012 Kegler, Brown, Hill & Ritter LPA
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90. Thank You
Vinita Bahri-Mehra, Esq.
Kegler, Brown, Hill & Ritter Co., L.P.A.
65 E. State Street, Suite 1800
Columbus, Ohio 43215, USA
Direct Dial: 1 614 225 5508
Fax: 1 614 464 2634
Email: vmehra@keglerbrown.com
Firm Web Page: www.keglerbrown.com
Global Business page: www.keglerbrownglobal.com
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91. w w w . k e g l e r b r o w n . c o m

92. Financing Your Future in India
C O N F I D E N T I A L
A N D
P R I V A T E
ST R I C T L Y
JPMorgan Chase Bank, N.A. Member FDIC
© 2010 J.P.Morgan Chase and Co. All rights reserved.

93. This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered (including such
client’s subsidiaries, the ―Company‖) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions
and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete
without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. Neither this presentation nor any of its contents
may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan.
The information in this presentation is based upon any management forecasts supplied to us and reflects prevailing conditions and our views as of this date, all of
which are accordingly subject to change. J.P. Morgan’s opinions and estimates constitute J.P. Morgan’s judgment and should be regarded as indicative, preliminary
and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and
completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us.
In addition, our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or any other entity. J.P. Morgan makes no
representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting effects of consummating a
C O N F I D E N T I A L
transaction. Unless expressly contemplated hereby, the information in this presentation does not take into account the effects of a possible transaction or
transactions involving an actual or potential change of control, which may have significant valuation and other effects.
Notwithstanding anything herein to the contrary, the Company and each of its employees, representatives or other agents may disclose to any and all persons,
without limitation of any kind, the U.S. federal and state income tax treatment and the U.S. federal and state income tax structure of the transactions
contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and
tax structure insofar as such treatment and/or structure relates to a U.S. federal or state income tax strategy provided to the Company by J.P. Morgan.
J.P. Morgan’s policies prohibit employees from offering, directly or indirectly, a favorable research rating or specific price target, or offering to change a rating or
price target, to a subject company as consideration or inducement for the receipt of business or for compensation. J.P. Morgan also prohibits its research analysts
from being compensated for involvement in investment banking transactions except to the extent that such participation is intended to benefit investors.
A N D
IRS Circular 230 Disclosure: J.P. Morgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included
herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or
recommendation by anyone not affiliated with J.P. Morgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related
P R I V A T E
penalties.
J.P. Morgan is a marketing name for investment banking businesses of J.P. Morgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging,
financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities Inc., J.P. Morgan plc, J.P. Morgan Securities
Ltd. and the appropriately licensed subsidiaries of J.P. Morgan Chase & Co. in Asia-Pacific, and lending, derivatives and other commercial banking activities are
performed by J.P. Morgan Chase Bank, N.A. J.P. Morgan deal team members may be employees of any of the foregoing entities.
ST R I C T L Y
This presentation does not constitute a commitment by any J.P. Morgan entity to underwrite, subscribe for or place any securities or to extend or arrange credit or
to provide any other services.
© 2010 J.P.Morgan Chase and Co. All rights reserved. 93

94. Trade Factoids and Notes
December 2011 Trade Figures:
Bureau of Economic Analysis of the United States
Department of Commerce
 US exports increased $265.5 billion to $2,103.1 billion in 2011. Goods were $1,498.2
billion and services were $604.9 billion.
 US exports have been growing at a pace greater than the 15 percent required to
double exports by 2015.

C O N F I D E N T I A L
US exports to India grew from $19.3b in 2010 to $21.6b in 2011.
 India is ranked 17th as an export market for US goods and services.
 India is witnessing an unprecedented consumption boom. India is growing at
approximately 8% per year, the second fastest growing economy in the world - leading
to a population of over 300-350 million middle-income Indians with high disposable
A N D
incomes. This group continues to fuel the consumption demand in India.
P R I V A T E
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 94

95. Economic Climate – It All Swirls Together
Recent Trade Environment
 Recent credit environment has resulted in liquidity and balance sheet constraints
 Market consolidation and reshaping in the current environment has limited the number of lending
institutions willing to lend at attractive rates
 Risk mitigation options such as distribution and insurance are reflecting the market volatility and
uncertainty limiting the hedging availability
 Due to global market uncertainty and instability, we have seen an increase in demand for risk mitigation
instruments such as guarantees and confirmations as well as for cost efficient transactions
C O N F I D E N T I A L
What We’re Seeing
 Issue – Capital goods buyers are struggling to raise capital in the debt market due to liquidity constraints
and increase in cost of funds, which consequently impacts their ability to either source new goods or
perform under their payment obligations.
A N D
 Solution – Buyers and Suppliers are working together with Export Credit Agencies and Lending Institutions to
enhance the credit risk by shifting it to sovereign risk, in order to access cost efficient capital and longer
P R I V A T E
repayment terms.
 By Product - Increased demand for US Ex-Im and Export Credit Agency financing in the market
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 95

96. Country overview
Overview Key statistics
 Located in South Asia, it is seventh largest country by Land Area  1.1 million square miles (One third the size of the U.S.).
geographical area and the second most populous country
 World’s twelfth largest economy at market exchange rates Languages  Hindi (National language), English (2nd language), 14 other
official languages
 India is the world’s largest democracy
Religions  Hindu (80%), Muslim (13%)
 Fourth largest economy in the world on purchasing power
basis after USA, China and Japan
 Strong legal system with a fair and independent judiciary. Currency  Indian Rupee (Symbol: INR or )
Largely based on English law
 Well developed capital markets — Bombay Stock Exchange is Fiscal Year  April 1st–March 31st
O L
ANN ID CC O NN R YI D I E C H TB IO A K
Asia’s oldest stock exchange
 Strong domestic consumption with a personal disposable Economy  12th Largest in terms of GDP of $1.089 trillion
P T N
income growth CAGR of 13.8% (2009-14E) size  4th largest in terms of PPP
 Important cities in India: Time  5 hours 30 minutes ahead of GMT
OU TF
 Mumbai (Key commercial center / financial capital)
 New Delhi ( Political capital)
Dec-09 Dec-10 Dec-11E
I D A
 Bangalore, Hyderabad, Chennai, Pune and Calcutta (other Population (mm) 1,198 1,214 1,231
important cities) Unemployment Rate 9.5% 9.5% 9.3%
Nominal GDP (US$bn) 1,221 1,495 1,745
P R I V A T E
 These cities account for over 80% of business GDP per capita (US$) 1,019 1,231 1,418
establishments in India Real GDP growth rates (%) 6.6% 8.1% 8.2%
WPI (%) 2.2% 8.9% 7.0%
 There are over 3,000 MNCs operating in India including a CPI (%)¹ 10.9% 13.6% 10.2%
number of small companies in the IT/BPO space INR/US$ 48.4 45.5 44.58
ST R I C T L Y
10 year Treasury yield 7.0% 7.9% 8.0%
 Indian banking sector was not affected during the recent Current Account Balance (US$bn) (26.3) (42.4) (52.9)
credit crisis and has emerged much stronger and efficient Current Fiscal deficit (%) (6.7)% (5.5)% (4.8)%
than before
Source: JPMorgan
© 2010 J.P.Morgan Chase and Co. All rights reserved. 96

97. Political and economic overview
Country Overview Real GDP growth of India (% y-o-y)
 11th largest economy in terms of GDP. 4th largest on PPP basis 12%
11%
after US, China and Japan V-Shaped recovery
10%
 Stable and institutionalized democratic political system
9% 8%
8%
7%
 Established administration, commercial, legal, accounting &
6%
banking systems 5%
6.1%
4%
 Third largest English speaking manpower base in the world
3%
2%
 R&D base for over one hundred Fortune 500 companies
1%
2010E
2011E
2012E
2013E
2014E
2015E
2001
2002
2003
2004
2005
2006
2007
2008
2009
O L
ANN ID CC O NN R YI D I E C H TB IO A K
 Vibrant capital market with more than 5,000 listed Companies
Source: JPMorgan
P T N
Domestic demand remains the key driver for GDP growth …but exports have become increasingly important
OU TF
GDP (US$bn)
Domestic demand % GDP The vast majority of manufacturing output is now exported
106%
3100 107% 108% Export Domestic Market
I D A
2600 106%
28%
2100 103% 104% 48%
P R I V A T E
73%
1600 101% 101% 2,920 102%
1100 100% 72%
1,495 52%
600 98% 27%
813
ST R I C T L Y
368 468
100 96%
1995A 2000A 2005A 2010E 2015E 1991 2001 2009
Source: Global Insight, IMF Source: RBI
© 2010 J.P.Morgan Chase and Co. All rights reserved. 97

98. Financial landscape & banking sector
Capital market and Foreign direct investment (FDI) Banking sector
 Equity market indices: Sensex (Bombay Stock Exchange) and NIFTY  Over 55,000 bank branches of total 70,000 branches support
(National Stock Exchange) electronic clearing
 4,900+listed companies–Equity market cap of over US$1,200bn  Base rate: Each bank declares a regulatory mandated base rate
 1,698 FIIs & 4,800+sub-accounts which is the lowest rate at which a bank can offer loans to any of its
 Quantum of FDI permitted varies by sector; Sectors such as customers
technology & power generation allow 100% FDI while real estate &
Types of clearing systems
agriculture prohibit FDI – Net FDI in 2009-10 was US$19.7bn
(US$17.5bn in 08-09)  Real Time Gross Settlement System (RTGS)
Debt markets  High value, urgent electronic clearing (within 2 hours)
 Fixed income–G-Sec, T-Bills, Corporate bonds, CPs  National Electronic Funds Transfer (NEFT)
 Corporate bond markets under developed and low volumes.  Low value electronic clearing
Appetite only for AA rated and above paper
 MICR
 Average daily turnover: Corporate Debt: $250mm;
G Secs: $4bn  Paper-based clearing
O L
ANN ID CC O NN R YI D I E C H TB IO A K
 Evolution of payments landscape
Foreign exchange
 Volumes still pre-dominantly led by paper based clearing (~80%)
P T N
but moving rapidly towards electronic modes
 INR freely convertible on current account
 Capital account convertibility not in the short term agenda
OU TF
 US$ weakness and domestic fundamentals (relatively strong growth
& improvement in trade deficit and strong US$ flows) support a 80% of clearing by value has shifted to electronic systems
stronger rupee
I D A
Key regulatory bodies Physical Electronic End State
Reserve Bank of India (RBI) Account Checks Funds Transfer
P R I V A T E
 Monetary Authority: Formulates, implements & monitors monetary
NECS/NEFT/RTGS
policy EFT
Demand Drafts
 Regulator/Supervisor: Prescribes parameters of banking operations
 Foreign Exchange Management, issuer of currency and banker to the Corporate Checks NEFT
Government and other banks Check Truncation
FIPB and SIA
ST R I C T L Y
PAP Checks ECS
 The Foreign Investment Promotion Board (FIPB) and Secretariat for
Industrial Assistance (SIA) are responsible for overseeing and
approving, as required, any foreign direct investment into India
© 2010 J.P.Morgan Chase and Co. All rights reserved. 98

99. Bilateral funding options
 Working capital funding (i.e. 364 days or lesser tenors)
 Short term loans: Can be availed for various tenors up to 1 year (e.g. 1 week, 3 months, 9 months etc)
 Overdrafts: Dynamic funding account to meet temporary cash flow mismatches
Local currency
 INR term loans
 To meet capital expansion or project funding needs. Typically from 3-7 years
 Regulated form of foreign currency borrowing for Indian companies
 Refers to commercial loans in specified forms availedproducts and Term Funding
 Short Term Loans, Overdraft from non-resident lenders, including parent company
 Forms of ECB: Bank loans, buyers’ credit, suppliers’ credit and securitized instruments (e.g. floating rate notes and
 Can be availed from local financial institutions
fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares)
 Minimum average maturity of 3 years for amounts up to US$20mm and 5 years for amounts above US$20mm and up to
US$500mm
External
O L
ANN ID CC O NN R YI D I E C H TB IO A K
Commercial  Subject to Reserve Bank of India (RBI) guidelines & restrictions on aspects such as end use, amount ($500mm per year)
Borrowings and tenor
(ECB)  ECB proceeds can be used for
P T N
 Investment in certain sectors, overseas direct investment in Joint Ventures (JV)/ Wholly Owned Subsidiaries and is
also permitted for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage
offer to the public
OU TF
 Use of ECB proceeds not permitted for on-lending, investment in capital market or acquisition of a domestic company,
working capital, general corporate purpose and repayment of existing Rupee loans. Also cannot be used for real estate
sector and issue of guarantees / SBLCs
I D A
 Buyer’s Credit (Post Import Financing) : Up to 364 days for raw materials and 3 years for capital imports
P R I V A T E
 Pre & Post Shipment Export Financing: Up to 364 days
Trade finance  Negotiation & Discounting of Export LC Bills
(both local &  Letters of Credit / Bank Guarantees
foreign
 Receivables Purchase: Both with and without recourse to the seller
currency)
ST R I C T L Y
 Domestic Supply Chain Financing
 Structured trade finance
© 2010 J.P.Morgan Chase and Co. All rights reserved. 99

100. J.P. Morgan in India
Why J.P.Morgan?
 J.P. Morgan is one of the oldest international banking
powerhouses in India
 Historical presence in India
 Operations since 1930; Present in India through heritage
emblems J.P. Morgan, Chase Manhattan and Jardine
Fleming
 Over 15,000 employees in India including the Global Mumbai
Service Center which supports 5 lines of business
Branch Office
 J.P. Morgan is a full service wholesale bank in India with 1
O L
ANN ID CC O NN R YI D I E C H TB IO A K
branch in Mumbai (financial capital of India) JPM is a fully International Coverage Officer – U.S. Based
registered Authorized Dealer with Reserve Bank of India
P T N
Vasudha Saxena
 Provides all types of onshore lending, credit and rates Executive Director
business, debt capital markets, asset management, Treasury New York, NY
OU TF
Services besides corporate finance & advisory, ECM, DCM and (212) 622-4961
vasudha.saxena@jpmorgan.com
Equities & F&O Multi-National Bankers – Asia
I D A
 JPM has a capital base of US$1.3bn in India across its various Coco Chung
entities Managing Director -APAC
Hong Kong
P R I V A T E
coco.chung@jpmorgan.com
 Total capital of JPM Chase Bank in India is ~ US$800mm. +852 28001816
 Strong coverage of local corporates & U.S. subsidiaries Deval Vyas
Executive Director
operating in India India
ST R I C T L Y
+91 22 61573762
deval.x.vyas@jpmorgan.com
© 2010 J.P.Morgan Chase and Co. All rights reserved. 100

101. Access to Capital and Borrowing Costs
 Banks in India are subject to Base Rate system, which became effective July 01, 2010.
 Base Rate shall include all those elements of the lending rates that are common across all
categories of borrowers.
 Banks may choose any benchmark to arrive at the Base Rate for a specific tenor that may be
disclosed transparently.
C O N F I D E N T I A L
 It’s important to note that the borrowing cost of an individual company depends on the
nature of financing, tenor, collateral quality, etc. Hence there may be high variation
among different companies - even in same country
 When discussing the supplier's financing cost in general, financiers tend to address the
medium tier
A N D
 When financing their receivables, companies in these markets could pursue local ECA
P R I V A T E
(Export Credit Agency) coverage when available, and the cost for that coverage is subject
to the buyer's credit rating, which is an additional cost (generally 50-100bps)
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 101

102. Global Trade Finance – What’s Top of Mind
Global Trade Finance Should:
 Integrate seamlessly with cash and liquidity processes to increase the efficiency of
treasury operations

C O N F I D E N T I A L
Employ a broad range of settlement, risk mitigation and financing tools and
solutions related to the commercial transaction and flow of goods
 Recognize that individual requirements differ. Therefore in order to select the
right mix of tools and solutions, demand a consultative approach from your
A N D
provider(s)
P R I V A T E
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 102

103. Global Trade Finance – Tools and Solutions
Classic Trade Solutions Structured Trade Solutions
 Imports  Receivable and payable financing
 Letters of credit (LC)
 Export Credit Agency (ECA) backed structured
 Documentary collections trade: Ex-Im Bank in the USA
 Exports  Pre-import/export financing structures
 Letters of credit
 Private credit insurance and political risk
 Documentary collections
insurance (PRI)
C O N F I D E N T I A L
 Standby letters of credit (SBLC)
 Financing sales of capital equipment with
 Bank guarantees terms greater than one year
 Issuance of standby letters of credit to
support bid, performance and payment bonds
A N D
 Financing of export-related accounts
Specialized Trade Solutions receivable and inventory
P R I V A T E
 Supply chain finance
 Purchase order management (open account)
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 103

104. Export Finance Life Cycle Trade Cycle Financing
Pre- Shipment: Shipment: Post-Shipment:
Negotiating the Sale Shipping Documents Transacting the Payment
and Terms of Payment
Title Transfer Financing the Receivable
Arranging Working
Capital Financing Financing the Buyer
C O N F I D E N T I A L
Working Capital Financing Foreign Buyer Financing
Bid & Performance Standby L/Cs Letters of Credit and Bankers Acceptance
Financing (generally, up to 180 days)
Export Letters of Credit
Non-LC Solutions
A N D
Non-LC Solutions
Documentary Collections and TA Financing
P R I V A T E
Ex-Im Bank or SBA Working Capital
Guaranteed Loan Program A/R Credit Insurance
Discounting BAs and Foreign A/R
ST R I C T L Y
Ex-Im Bank: Direct Buyer Financing
© 2010 J.P.Morgan Chase and Co. All rights reserved. 104

105. Classic Trade Solution - Documentary Letter of Credit
Letter of Credit (LC) Characteristics
 Offers the most protection to the SELLER
 Three independent ―agreements‖ underline a letter of credit
 between BUYER and SELLER (their contract)
 between Applicant and Issuing Bank (application and
reimbursement agreement)
C O N F I D E N T I A L
 between Issuing Bank and Beneficiary (the LC)
 Banks deal in documents only. BUYER’s recourse for problems
with goods is to the contract with the SELLER
A N D
 Documents presented under an LC must comply with its terms
and conditions, otherwise there is no obligation to honor
T E C E
L S T TR R C F C R E D I T RC IY V LA
E T E I OT L Y P
© 2010 J.P.Morgan Chase and Co. All rights reserved. 105

106. Documentary Letter of Credit: a tool to provide
short term finance to your Buyer – Overview
 Buyer has requested extended payment terms of 90 days from date of
shipment
 Seller has countered that they will not offer such terms on Open Account
basis, but would consider if Buyer provides acceptable LC and agrees to
absorb the associated additional costs of financing
 Seller talks with their bank, to obtain indicative pricing for 3 key
credit/finance driven fees associated with this arrangement:
C O N F I D E N T I A L
 Confirmation fee
 Acceptance commission
 Discount charges
 Buyer’s bank issues the LC
A N D
 Seller’s bank is the Advising and Confirming Bank
I V A T E
 LC is payable via a Time Draft to be drawn at 90 days from date of Ocean
L S T TR R C F C R E D I T R
P
Bill of Lading
E T E I OT L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 106

107. Documentary Letter of Credit: a tool to provide
short term finance to your Buyer – The Numbers
 Seller ships and presents documents to their bank, requesting that the
Accepted Draft be discounted.
 Documents are examined and found to be in compliance with the LC
 Time Draft is Accepted under the LC, creating a Bankers Acceptance
 Seller’s bank discounts the Bankers Acceptance, depositing funds to the
account of the Seller
 Seller’s bank collects the full amount due under the Bankers Acceptance
C O N F I D E N T I A L
from the Issuing Bank at maturity
 Illustrative Fees: $300,000 sale to India at 90 days date of shipment
 Confirmation fee 2.0% per annum. LC expires 90 days from date of issuance: $1500
 Acceptance commission 2.5% per annum. Documents presented and Bankers Acceptance is
A N D
created10 days after shipment, leaving 80 days left until the payment due date: $1667
 Discount charges 90 day LIBOR + 2%. Bankers Acceptance is discounted with 80 days left to
I V A T E
maturity: $1940
L S T TR R C F C R E D I T R
P
 Total “financing” costs: $5107. 1.7% of the face value of the sale, or 6.8% if you multiply the
E T E I OT L Y
90 day cost by 4, to express it as an annualized or 360 day cost
© 2010 J.P.Morgan Chase and Co. All rights reserved. 107

108. Structured Trade Solution - Export-Import Bank
 The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the
United States. Ex-Im Bank's mission is to assist in financing the export of U.S. goods and services to
international markets.
 The agency assists exporters by guaranteeing term financing to creditworthy international buyers, both
private and public sector, for purchases of U.S. goods and services.
 Ex-Im Bank does not compete with private sector lenders but provides export financing products that fill
gaps in trade financing. They assume credit and country risks that the private sector is unable or
C O N F I D E N T I A L
unwilling to accept. They also help to level the playing field for U.S. exporters by matching the financing
that other governments provide to their exporters.
 Product suite includes working capital guarantees (pre-export financing); export credit insurance; and
loan guarantees and direct loans (buyer financing). No transaction is too large or too small. On average,
85% of transactions directly benefit U.S. small businesses.
A N D
 Ex-Im Bank approved $32.7 billion in total authorizations in FY 2011 -- an all-time Ex-Im record. This total
includes more than $6 billion directly supporting small-business export sales -- also an Ex-Im record. Ex-
P R I V A T E
Im Bank's total authorizations are supporting an estimated $41 billion in U.S. export sales and
approximately 290,000 American jobs in communities across the country.
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 108

109. Access to Solutions – What is “Bankable”?
■ In a recent export finance seminar, Mike Howard, Regional Director of the Ex-Im Bank,
made the very important statement: Ex-Im’s programs are not designed to make bad
deals look good.
■ During this most recent financial recession, there has been much attention paid to credit
quality as well as compliance (OFAC, Patriot Act and Know Your Customer, for example).
■ When you’re seeking to talk with a commercial bank regarding financing to support your
global trade activity, you’ll need to present a solid case.
C O N F I D E N T I A L
■ A business plan and 2 to 3 years of financial statements are a start.
■ Arrange a meeting with a commercial banker at your financial institution and explain
your complete scenario – not just the single transaction, but how that transaction fits
into your company’s overall business and business plan.
A N D
■ Be prepared to tell your story a couple of times, because export finance will almost
always involve not only your domestic banker but also the international specialist(s) at
P R I V A T E
that bank who will work with the banker.
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 109

110. Ex-Im Bank EWCG Program Benefits –
Expansion Of Borrowing Base
Asset Based Facility WCGP
Advanc
Collateral Amount Advance Collateral Collateral
e
Exportable Inventory
Raw Materials $ 200,000 20% $ 40,000 75% $ 150,000
WIP $ 200,000 0% $ 0.00 75% $ 150,000
Finished Goods $ 600,000 50% $300,000 75% $ 450,000
C O N F I D E N T I A L
Subtotal $1,000,000 $340,000 $ 750,000
Foreign Accounts Receivable
(A/R)
Open Account $ 400,000 0% $ 0.00 90% $ 360,000
A N D
L/C Backed A/R $ 600,000 75% $420,000 90% $ 540,000
P R I V A T E
Subtotal $1,000,000 $420,000 $ 900,000
Total Borrowing Base
$760,000 $1,650,000
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 110

111. Structured Trade Finance –
Protecting Your Accounts Receivable
THE ONLY UNINSURED ASSET
 One of the most vulnerable to a loss
 More likely to be affected by business cycles
 Provides the cash flow (lifeblood) of a business
 Represents permanent investment
 High cost to maintain (funded through bank borrowings and cost of delinquencies)
C O N F I D E N T I A L
Senior
Cash
Executives
Land &
A N D
Accounts
Buildings Receivable
P R I V A T E
Mach
& Inventories
Equip
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 111

112. Short-Term Export Credit Insurance
WHAT:
Commercial Risk of Default: Insolvency and Protracted Default
Country/Political Risk: Debt Moratorium, Trade Embargo, License Cancellations etc.
WHY:
Provides coverage against the unforeseen and unexpected
Export receivables are usually the riskiest portion of the current asset portfolio yet it is the only one
that is unprotected
C O N F I D E N T I A L
WHERE:
The US Government’s Official Export Credit Agency: Ex-Im Bank
The Private Sector: Filling the ―niches‖ and shortfalls in the programs of the ECA’s. Commercially
oriented insurance programs
A N D
WHEN:
P R I V A T E
When you want to mitigate the risk of loss and/or cap it
When you want to meet or beat the competition
When you want to tap new sources of financing for your company and your buyers
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 112

113. Summary – Global Trade Finance
Key Challenges
■ Arranging financing: for you, your suppliers, your customers
■ Navigating regulations: U.S. and foreign
■ Managing counterparty risk: suppliers and customers
■ Controlling and optimizing cash: reducing DSO and extending DPO
C O N F I D E N T I A L
■ Accessing expertise: local market knowledge, best practices
Contact
A N D
Martha I Gabrielse, Vice President
P R I V A T E
JP Morgan Chase Bank, NA
616-771-7410
ST R I C T L Y
martha.i.gabrielse@jpmchase.com
© 2010 J.P.Morgan Chase and Co. All rights reserved. 113

114. C O N F I D E N T I A L
A N D
P R I V A T E
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 114

115. C O N F I D E N T I A L
A N D
P R I V A T E
ST R I C T L Y
© 2010 J.P.Morgan Chase and Co. All rights reserved. 115