Reforms push too late coming,foreign firms shut shop in India

The government’s renewed enthusiasm for reforms may have come a bit too late for a bevy of foreign firms that have already exited the country since the beginning of this year

Written by Anil Sasi | New Delhi | Published: September 18, 2012 2:17 am

The government’s renewed enthusiasm for reforms may have come a bit too late for a bevy of foreign firms that have already exited the country since the beginning of this year,blaming inclement policy environment and lack of investment avenues.

While the US insurance major New York Life and American mutual fund major Fidelity Worldwide Investment sold off their operations in India earlier this year,Motorola has announced plans to axe about 20 per cent of its global workforce and shut shop in several markets,including India. Germany’s Fraport,the world’s second biggest airport operator,had said in June it was shutting its development office in the country.

Abu Dhabi-based telecom firm Etisalat and Manama-based Bahrain Telecommunications Co (Batelco),whose licences were among those cancelled by the Supreme Court in February,have already marked an exit. In the power sector,AES India,an arm of the one of the earliest global entrants into India,US electricity major AES,too has announced an exit from a majority of its India operations,industry players said.

“With policy inaction,corruption and adverse judicial verdicts battering the overall investment sentiment,big names in key sectors making an exit does not augur well for the country’s growth story. India,as a macro call,is clearly losing its sheen,” an investment analyst said.

Among the big names,Google-acquired Motorola is reportedly shutting down its operations across much of the Asia Pacific,coming close on the heels of Motorola Mobility CEO Dennis Woodside’s comments that the company would be letting go of 20 per cent of its workforce and cutting down on its India operations. Email sent by The Indian Express to Motorola media incharge for Asia Pacific Will Moss on August 30,2012,remained unanswered. Google had acquired Motorola Mobility for $12.5 billion in May this year.

A query sent to Fraport on the issue too remained unanswered. An auto response to a mail sent to Fraport India head Ansgar Sickert said that he left India on July 19,2012. Phone calls made to Fraport India’s office numbers did not elicit any response. At the time that it sold off its 43 per cent stake in S Tel for $175 million,marking the first exit by a foreign operator after the SC cancelled the 122 telecom licences,Batelco had justified the move saying: “This (the sale) is a part of an earlier understanding with the Indian partner to exit,given the circumstances surrounding the 2G probe in India over the past 12 months.”

The investor community too seems to be looking to prune its India exposure,with top private equity funds such as Temasek and Warburg Pincus actually making losses while exiting their existing investments in India. In July,Singapore government’s sovereign fund Temasek exited Welspun India Ltd by selling its entire stake for Rs 56 crore. It sold a 11.6 per cent stake,held through subsidiaries Dunearn Investments Mauritius and Baytree Investments Mauritius,on the BSE.

In 2005,Temasek had invested Rs 118.26 crore in Welspun. Earlier,in May,Warburg Pincus sold 24.5 per cent of its 33 per cent stake to Seychelles-based Global Town Investment Ltd at a loss,according to industry estimates. In 2011 too,Warburg Pincus exited from gems and jewellery exporter Vaibhav Gems Ltd at a loss. The PE firm sold a 28 per cent stake for Rs.18.4 crore,compared with a purchase cost of Rs 247 crore. Blackstone too is sitting on losses in two of its investments in listed firms,Gokaldas Exports Ltd and NCC Ltd.

Going,gone

* Etisalat,Batelco have exited

* New York Life,Fidelity Worldwide Investment have sold operations

* Motorola has announced that it is shutting shop in India

* Airport operator Fraport is shutting development office here

* AES India to exit from majority of operations

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