1. Investing in IndiaMay 2013

2. India is the 7th largest country in the world by area and is ranked as the 3rd largest economy in theworld when taking Purchasing Power Parity as the measurement index. For the financial year 2012-13 Indias GDP grew at 5.0 per cent vs. 6.2 per cent in financial year2011-12. Government of India is targeting average growth rate of 8 per cent over the next five years(2012-17). National Stock Exchange (NSE) is the 2nd fastest growing exchange and 9th largest stock exchange inthe world by market capitalization USD 1.28 trillion as of January, 2013. India has emerged as an important investment destination with cumulative foreign investment inflow inIndia has reached USD 287.12 billion as on February, 2013. Government plans USD 1 trillion spending on infrastructure in the 12th Plan period (2012-2017). Indian Government is focusing on skill development and has mandated National Skills DevelopmentCorporation (NSDC) to create an ecosystem of vocational training institutions that will create150million job ready workforce by 2022. Total M&A and private equity deals in the month of February 2013 were valued at USD 2.75 billion ascompared to USD 15.45 billion and USD 8.15 billion in corresponding months of 2012 and 2011respectively.INDIA OVERVIEWSource: Economic Survey 2012-13 3. Indias GDP Growth Leading GDP Per Capital (PPP) India and ChinaIndia Foreign Exchange Reserves Balance of Payment (USD Billion)INDIAN ECONOMY AT GLANCE249.07253.98257.77261.29260.08253.36256.84240245250255260265Oct/12 Nov/12 Dec/12 Jan/13 Feb/13 Mar/13 Apr/13USDBillionSource: Reserve Bank of India, www.tradingeconomics.com9501,241 1,2241,3621,6841,841 1,8782,18005001,0001,5002,0002,500FY07 FY08 FY09 FY10 FY11 FY12 FY13E FY14EUSDBillionSource: India Macroscope, Citi Research166.16189.00 182.44256.16309.77291.20257.63308.52 300.64383.48499.53479.600100200300400500600FY08 FY09 FY10 FY11 FY12 FY13EUSDBillionExports Imports6201.646809.647567.848442.232861.123086.023372.663649.5301000200030004000500060007000800090002009 2010 2011 2012China India 4. Index of Industrial Production Credit Growth in Key Sector (Per cent)Indian Central Banks Interest RateINDIAN ECONOMY AT GLANCE51.51,0901,06125.116.729.033.814.9 18.5 20.024.627.4 29.925.019.618.220.5 21.4 20.819.20102030405060H1 H2 H1 H2 H1Electricity Cement Basic Metal ManufacturingSource: Mid Year Economic Analysis 2012-13FY 2012-13FY 2011-12FY 2010-11Trends in growth of key sectors5.58.19.34.7-0.31.2-4.88.38.97.09.52.611.91.05.1-0.84.56.73.87.4-6-4-2024681012142010-11 2011-12 2011-12* 2012-13*Electricity Coal Steel Crude Oil CementSource: Mid Year Economic Analysis 2012-13* April September179.4 181.8 176.2157.6 160.7140.5191.2 193.4 190.9132.2 135.0124.00.0050.00100.00150.00200.00250.00Dec/12 Jan/13 Feb/13General Electricity Manufacturing MiningSource: Ministry of Finance, Department of Economic Affairs, Economic Division INDIA7.25%7.50%8.00%8.25%8.50%8.00%7.75%7.50%7.25%6.60%6.80%7.00%7.20%7.40%7.60%7.80%8.00%8.20%8.40%8.60%May2011Jun2011July2011Sep2011Oct2011Apr2012Jan2013Mar2013May2013 5. India Savings Rate (% of GDP) Indian Inflation ScenarioIndian Govt. Debt to GDP (%)Source: Planning Commission, Govt. of India7.558.077.24 7.186.62 6.845.960123456789Oct/12 Nov/12 Dec/12 Jan/13 Feb/13 Mar/13 Apr/1336.832.033.7 34.030.8 31.032.42728293031323334353637382008 2009 2010 2011 2012 2013E 2014E75.44074.724 74.97369.42768.05367.57062.0064.0066.0068.0070.0072.0074.0076.0078.002008 2009 2010 2011 2012 2013** Till April 2013Foreign Direct Investment (USD Billion)34.84341.87337.74534.84746.55333.912051015202530354045502008 2009 2010 2011 2012 2013** Till Feb 2013INDIAN ECONOMY AT GLANCE 6. REGULATORY FRAMEWORKInvesting in IndiaFinancial Investors(FII or FVCI)Invest in a Company with a services fulfillmentsubsidiary in IndiaInvest in a Tax Haven with a services fulfillmentsubsidiary in IndiaDirect investment in an Indian company from outsideIndia (Tax Havens)Direct investment in an India company from outsideIndia through a venture capital fund registered withSEBIStrategic Investor (FDI)Operate as aForeign companyLiaison OfficeBranch OfficeProject OfficeOperate as anIndian CompanyWholly ownedsubsidiaryPrivatePublicJoint VentureINDIA ENTRY STRATEGY 7. REGULATORY FRAMEWORKINDIA ENTRY STRATEGY No prior permission required. Only requirement to inform Central Bank (ReserveBank of India) within 30 days of inflow / issue of sharesGovernment Approval Route Prior government (i.e Foreign Investment Promotion Board) (FIPB) approval needed.The approval required for FDI in the following cases: Where provisions of Press Note 1(2005 Series) are attracted; or Proposals for foreign equity beyond 24% in MSE reserved sector; and Proposals falling outside notified sectoral policy/caps Decision generally communicated within 6-8 weeks intimation as mentioned inautomatic approval route still needs to be complied withAutomatic RouteFDI in India can be undertaken through two routes: 8. REGULATORY FRAMEWORKFDI REGULATIONS KEY SECTORSSector/Activity FDI Cap Entry Route NoteInfrastructure including Power, Roads, Ports 100% AutomaticSubject to provisions of the Electricity Act, 2003,NHAI Guidelines, and other sectors specificregulationsDrugs & Pharmaceuticals including those involvinguse of recombinant DNA technology100% AutomaticBanking - Private sector 74% (FDI+FII) AutomaticSubject to guidelines for setting up branches/subsidiaries of foreign banks issued by RBI.Non Banking Finance Companies 100% AutomaticMinimum capitalization norms exist for variouskinds of NBFCs for fund based/non fundbased/JVs etc.Construction Development projectsNote: Not allowed in Real Estate Business100% AutomaticSubject to certain conditions related to minimumcapitalizationPetroleum & Natural Gas sector: Refining49%(PSUs)100%(Private)FIPB (PSUs)Automatic(Private)Subject to Sectoral policy and no divestment ordilution of domestic equity in the existing PSUsPrint Media: Publishing of newspaper/ periodicalsdealing with news & current affairs26% FIPBSubject to Guidelines notified by Ministry ofInformation & BroadcastingRetail & trading100% (C&C)100% (Singlebrand)51% (Multi brand)Automatic (C&C)FIPB (Singlebrand)FDI in single brand product retail trading issubject to certain conditions.TelecomA) Basic/CellularB) Passive InfrastructureC) Telecom EquipmentA) 74%B & C) 100%A&B) Automaticup to 49%.FIPB beyondC) AutomaticSubject to various conditions and sectoral caps 9. REGULATORY FRAMEWORKM&A in INDIAAcquisition in IndiaStock Sale Business SaleUnlisted Company Listed CompanyAsset Sale(Piecemeal Asset Sale)Slump Sale(Sale as going concern) Companies Act (sec 391-394, Minorityshareholders rights at25%) Sale of shares entailsincome tax @ 10% afterone year Companies Act (sec 391-394, Minorityshareholders rights at25%) SEBI Takeover Code SEBI insider tradingguidelines SEBI Issue Of Capitaland DisclosureRequirements Regulations Corporate governance NIL capital gains tax forshares sold on the floorof stock exchange afterone year For off-markettransaction, capital gaintax is 20% with indexationand 10% withoutindexation Companies Act(shareholder approval bysimple majority) Stamp duty Sales tax, VAT Income tax (capital gains@ 30% of gain over taxWDV) Companies Act(shareholder approval bysimple majority) Stamp duty Income tax (capital gains@ 20% of gain overnetworth of division usedfor more than 2 years) 10. REGULATORY FRAMEWORKM&A in INDIAType Schematic Description CommentsStock (listed andunlistedcompanies) Key approval would be Central Government(FIPB) approval, if applicable In case of a listed company, an acquisitionwould trigger the requirement that the buyermake a public tender offer as per the SEBItakeover code The acquisition price would be driven by themarket price in addition to the negotiatedprice in the case of a listed target companyAsset Piecemeal sale of assets allows buyer to pickand choose. Buyer can choose to pickemployees potentially with fresh contracts Regulatory claims would typically stay withowner Company. However certain assetslinked claims (Factories act, environmentrelated) would move to the buyer company.Slump Target business sold as a going concern.Allied assets, liabilities, people etc. also move Assets values not identified for each assetand hence need to be allocated on a fair valuebasis in the buyers balance sheet Typically liabilities related to people, incometax, sales tax and excise etc. move with thegoing concern Typically, litigation stays with ownercompany 11. REGULATORY FRAMEWORKKEY REGULATION THAT AFFECT M&A in INDIARegulation / Regulator Key area of influence / RegulationForeign Direct Investment Policy Dept of Industrial Policy & Promotion, Foreign InvestmentPromotion Board (FIPB) Reserve Bank of (RBI) Exchange Control Department Investment in existing entities may require FIPB and RBIapprovals, if the particular sector is subject to foreign investmentrestrictions Valuation benchmarks when a non-resident is acquiring/sellingshares from/to a residentTakeover Regulations Securities and Exchange Board of India Tender offer requirements for acquiring shares/control of a listedcompany Pricing is linked to historical and prevailing market price as well asthe negotiated dealDelisting Regulations Securities and Exchange Board of India For delisting a company from all stock exchanges and taking thecompany private Pricing is determined by reverse book-building by theshareholders of the companyCompetition Regulations Competition Commission of India (CCI) Post M&A transaction, if an entity exceed particular combinedlimit of assets or turnover, an approval from commission may berequiredInitial Public Offer Regulations Securities and Exchange Board of India Initial public offer / follow-on offering requirements by alisted/unlisted company to the public 12. REGULATORY FRAMEWORKKEY REGULATION THAT AFFECT M&A in INDIARegulation / Regulator Key area of influence / RegulationCompanies Act (Relevant) High Court Registrar of Companies and Department of Company Affairs Implementing a Scheme of Merger or Demerger or any hybridarrangements Matters requiring approval of shareholders (simple majority andsuper majority) Permissible instrument typesStamp Duty Act, Sales Tax Act Registrar of Stamps, in the respective state government,(relevant) state/central authorities Transaction cost implications of a proposed structure, especiallyif relevant state Stamp Act is ambiguous on a certain proposedstructureIncome Tax Act Income Tax Department, Ministry of Finance Tax implications of a proposed structure especially treatment ofcapital gains Corporate tax rate in is 32.23% Capital gain from sale of equity shares exempt from tax if sharesare held for more than one year and sold on the floor of the StockExchangeOther Regulations[Continued Listing, Corporate Governance, etc.] Securities and Exchange Board of India Dealing with and conditions relating to public shareholding, andcorporate governance requirements of existing and to-be-listedcompanies 13. PharmaceuticalInfrastructureCapital GoodsFMCG & RetailPowerAutomotiveKey SectorsKEY SECTORS 14. Indian Automotive Industry is expected to bethe worlds 7th largest automobile market by2016 and the 3rd largest by 2030. Indian Two Wheeler Industry is the 2nd largestin the world after China. Strong demand growth due to rising incomes,growing middle class, and a young populationis likely to propel India among the worlds topfive auto - producers by 2015. The industry turnover is estimated to reachUSD 145 billion by 2016. India has significant cost advantages; autofirms save 10-25 per cent on operations inIndia compared to Europe and Latin America. India has a large pool of skilled manpower anda growing technology base. Government aims to develop India as a globalmanufacturing as well as R&D hub.0.30.5 0.5 0.50.04 0.04 0.08 0.10.2 0.20.30.41.01.11.52.00.000.501.001.502.002.502008-09 2009-10 2010-11 2011-12Exports of Automobile from India (Mn units)Passenger Vehicle Commerical Vehicle Three Wheelers Two WheelersIndian Automotive ClustersAUTOMOBILESource: IBEF, SIAM 15. 27.931.345.338.358.167.101020304050607080FY 07 FY 08 FY 09 FY 10 FY 11 FY 12Indias growing engineering exports (USD billion) The Indian engineering industry accounts for27 per cent of the total factories in industrialsector and represents 63 per cent of the overallforeign collaborations. Indian engineering exports stood to at USD67.1 billion in FY12 as compared to USD 58.1billion in FY11. Over the period FY07-12, exports from thesector have posted a CAGR of 19.2 per cent. Under the 12th five year plan the demand for isprojected to grow at an average CAGR of 15per cent. Cumulative projects pipeline building up ofover USD 72 billion of government projects tobe awarded in the 12th five year plan. Key policy initiatives aimed at accelerating theinvestment spend such as: Development of Delhi Mumbai IndustrialCorridor 1500 kms to be awarded in FY14 under theDedicated Freight Corridor CorporationCAPITAL GOODSSource: IBEF, Department of Heavy Industries Report of working group on capital goods and engineering sector for 12th five year plan236.78 130.96452.323016.62232.5 301.182806.04317.830500100015002000250030003500MachineToolsPlasticMachineryEMM* HEE** Metallurgical Process Plant EngineeringSectorDies andMouldsProjected Market Size by FY 2016-17 (USD billion)*EMM Earthmoving and Mining Machinery**HEE Heavy Electrical Equipment 16. India is the 5th largest producer and consumer ofelectricity in the world after China, US, Russiaand Japan. Indian power sector is one of the key sectorsattracting FDI inflows into India; inflowsrecorded at CARG of 63 per cent during FY 06-12. Aggregated capacity addition of 20,334 MWhave been planned during the XIIth Five YearPlan (2012-17). Government of India is planning 9 Ultra MegaPower Projects of 4 GW each with an estimatedinvestment of USD 36 billion. National Grid is being developed and isestimated to have a capacity of 200,000 MW andan inter-regional transmission capacity of 37,000MW by 2012. 100 per cent FDI is allowed in Indian PowerSector (except under nuclear segment). Government policy and support: Elimination of licensing for varioussegments, removal of entry barriers Cost reduction and rationalization of tariffs;development of Ultra Mega Power Projects Fuel supply agreement of power producerswith Coal India40.77%29.73%29.49%Total Installed Capacity by SectorStateCentralPrivate4,78039,41625,856141,714020000400006000080000100000120000140000160000Nuclear Hydro RES* ThermalInstalled capacity in MW (as on Jan 31st, 2013)POWERSource: IBEF*RES Renewable Energy Source 17. Infrastructure sector in India has beenwitnessing rapid growth in its differentsegments with the growing urbanization. National Highways Authority of India alonehas awarded 17 projects worth USD 5.15billion. USD 1 trillion worth of expenditure ininfrastructure is estimated over the next fiveyears (FY 13-17). Investment of USD6.4 billion is expected inconstructing roads, bridges and bypasses inFY13. Roads and bridge infrastructure industry to beworth USD 19 billion by FY17. Road infrastructure is a key governmentpriority; the sector has received strongbudgetary support over the years. Encouragement to private sector participation;relaxation of foreign investment norms. FDI of up to 100 per cent is allowed under theautomatic route in most asset class.789 91113161902468101214161820FY 10 FY 11 FY 12 FY 13F FY 14F FY 15F FY 16F FY 17FRoads/Bridges infrastructure value in India(USD billion)INFRASTRUCTURESource: IBEF2.843.483.185.66.401234567FY 09 FY 10 FY 11 FY 12 FY 13Outlay for roads under respective Union Budgets (USD billion)Road transport and highways 18. India is 3rd largest market in the world in termsof volume and 14th in terms of value. Indian pharmaceutical industry sales stood atUSD 15.6 billion during FY 2011 and isprojected to reach USD 55 billion by FY 2020. Pharma exports from India are forecasted todouble over the next five years. The tradesurplus in pharma sector is likely to expand toUSD 16.5 billion by FY 2016. India has 120 US FDA approved plants inaddition to 84 UK MHRA approved plants. India rates higher than other countries on costefficiency. Cost efficiency continues to createopportunities for pharma companies inemerging markets and Africa. Indian pharmaceutical companies are scaling upthe value chain by focusing on innovation. By 2017, government plans to provide freegeneric medicines to half the population at anestimated cost of USD 5.4 billion. Government is also sponsoring programmesset to provide health benefits to over 380million people by 2017.6.5712.96245501020304050602005 2010 2015 2020Indian Pharma market is expected to grow to $ 55 Billion by 2020PHARMACEUTICALSource: IBEF3.95.16.17.08.610.713.3024681012142009 2010 2011 2012 2013F 2014F 2015FPharma exports from India (USD billion) 19. India is among the worlds youngest nations,with a median age of 25 years as compared to43 in Japan and 36 in the US. India is poised to become the worlds 5th largestconsuming country by 2025. Food products is the largest consumptioncategory in India, accounting for nearly 21 percent of the countrys GDP. India is recognized as a cost-effective qualitymanufacturing base in the world market. Indias consumer class is estimated to grow~12x with more than 23 million people likely tobe listed among the worlds wealthiest citizens.2%12%43%8%4%4%5%22%Indian FMCG market SegmentsBaby Care Fabric Care Food Products Hair CareHousehold OTC Products Others Personal Care254374010203040506070802008 2013 E 2018 EMarket Size ($ Bn)FMCGSource: IBEF 20. 350.20425.00825.00020040060080010002009 2010 2014 EIndian Retail market ($ Bn)62%10%8%6%4%4%3%2%1%Market SegmentFoodFashionFashion accessoriesLeisure & EntertainmentConsumer DurablesHealth & BeautyFurnitureTelecomBooksRETAILSource: IBEF Indian Retail market size is estimated at USD425 billion and is projected to grow at 25 percent per annum to reach USD 825 billion by2015. Food is the largest segment in terms of itscontribution to the total value of the retailmarket, followed by fashion and fashionaccessories. Indian luxury retail market is expected to growto USD 30 billion by 2015, making it the 12thlargest luxury retail market in the world. With the rise in disposable income andincreasing urbanization, the number of luxurygoods consumers in India is increasing rapidly. 21. 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