Doing business in India

2

Contents

Section 1 India – An Overview

Section 2 Trade

Section 3 Doing Business In India

Section 4 HSBC In India

Disclaimer: This presentation pertains to investment issues, financial markets and other related areas and is for information purpose only. Investors and interested parties should seek to get relevant business related information directly from the concerned government body

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Section 1 India – An Overview

4

• Population: 1.17 billion (Est. 2009)

• Average literacy rate is 65%

• Land area: 1.27 million square miles (1/3 of US)

• Languages: 18 Languages (English widely used)

About India – Snapshot

2005

785877

India GDP (USD Bn)

1115 1175 1175

1381

16381800

1600

1400

1200

1000

0

200

400

600

800

2006 2007 2008 2009 2010e 2011e

Source: HSBC Research

Did you know – India is the world’s largest democracy

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Investment Climate

Favourable demographics (Rise of the “Great Indian Middle Class”)• More than 35% of the Indian population is between 15 – 35 (Working population to rise to 70% by 2030)• 2nd fastest growing HNWI market (20.5%) with over 100k HNWIs (Merrill Lynch Report)

Access to labour and skills (Cost Advantage) • Over 380 universities, 11,200 colleges and 1,500 research institutions• World’s largest pool of English speaking scientists & engineers • Labour cost (US$ p.a.) @ 2200, as against 3600 China, 6600 Brazil, 8500 Poland • Less than US$ 7,500 p.a. for a call center agent in India (US$ 19,000 in US, US$ 17,000 in Australia)

Financing (Credit Growth 30%+)• Credit ratings of SMEs introduced• Firms’ new investments financed by commercial bank credit: 27.7% (India) v.s 14.7% (globally)*

Infrastructure• Largest road network in the world (3.85Mn kms) • 12 major & 187 minor ports over 7,500 kms of coastline • 5th largest installed power capacity of 123GW  • Privatization of airports, ports, road projects

* World Bank survey

Did you know – India is 1 of only 3

counntries to make its own supercomputers

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Section 2 Trade

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• GDP to touch USD 1,600 Bn by 2011 from USD 785Bn in 2005 (over 100% growth in 6 years)

• GDP growth rate in the 7% - 10% range over the last 5 years

• Growing trade relations and wider diversification across countries

– Share of US in total trade down from 14.1% in 1991 to 11.4% in 2008-09

– Share of China up from 0.9% in 1991 to 5% in 2008-09

– ASEAN, WANA and South Asian economies account for 37% of Indian exports and 39% of imports

• Foreign trade growing at a rate more than twice the growth rate of GDP

India in the global context

Did you know – India is the world’s

12th largest, 2nd fastest growing economy

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Trade flows – India

Source: Ministry of Commerce, Govt. of India (2008-09)

4.6% share in exports and 2.5% share in imports

Amongst top 5 export destinations for India

Rank Imports (Top 10) %Growth %Share

1 China 19.7 10.7

2 UAE 76.5 7.8

3 Saudi Arabia 2.6 6.6

4 USA (11.9) 6.1

5 Iran 13.1 4.1

6 Germany 21.5 3.9

7 Switzerland 21.6 3.9

8 Australia 42 3.6

9 Kuwait 24.5 3.2

14 Singapore (5.7) 2.5

Rank Exports (Top 10) %Growth %Share

1 UAE 56.5 13.2

2 USA 2.0 11.4

3 China (13.9) 5.0

4 Singapore 14.4 4.6

5 Hongkong 5.4 3.6

6 UK (0.8) 3.6

7 Germany 24.7 3.4

8 Netherlands 20.9 3.4

9 Saudi Arabia 37.7 2.8

10 Belgium 6.5 2.4

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Trade flows and FDI – India/Singapore

Major items of trade

Exports from India:

• Mineral oils & fuels

• Jewellery, precious stones

• Electrical machinery

• Aluminium and products

Imports into India:

• Products of mineral oils

• Electrical equipment

• Organic chemicals

• Optical/Medical instruments

FDI from Singapore to India:

• Exports from India:

• FDI from Singapore to India:

• Cumulative FDI : USD 9.5Bn (9% share)

• Highest inflows from any country apart from Mauritius

2006

5.30%4.80% 4.50%

4.60%

5.43

Exports from India (USD Bn) % Share

6.05 7.38 8.44

6%

5%

4%

3%

2%

1%

0%

9

8

7

6

5

0

1

2

3

4

2007 2008 2009

2006

2.3%

3.0%3.2%

2.5%

3.35

Imports into India (USD Bn) % Share

5.48 8.12 7.65

3.5%

2.5%

3%

2%

1%

0.5%

1.5%

0%

9

8

7

6

5

0

1

2

3

4

2007 2008 2009

Source: Ministry of Commerce, Govt. of India

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Section 3 Doing Business in India

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What can you do in India?

Did you know – In area terms, India

is 70% the size of Europe

Tap the consumer base

Tap the cost advantage

Tap the trade opportunity

Access India Tap industry

expertise

Tap the talent pool

Tap the financial opportunity

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How can you access India

Foreign Direct Investment: Automatic Route - Equity limits – Insurance (26%) – Airlines (Domestic/cargo)/ Telecom services/Private sector banks (74%) – Pharmaceuticals, Non banking financial companies, Food processing (100%)

Foreign Direct Investment: With Prior Permission (Foreign Investment Promotion Board) – News & current affairs (26%) – Broadcasting - Cable, DTH (49%) – Trading (100%) – Development of airports (100%)

Foreign Portfolio Investment: Investment in primary and secondary markets – Registration with Securities and Exchange Board of India – Own up to 10% of the paid-up capital of an Indian company – Foreign Institutional Investors can cumulatively hold up to 24% of paid-up capital of a company

Did you know – India is 1 of only 3

countries to make its own supercomputers

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How can you access India

Indian Company

Joint Venture• Strategic alliances with Indian partners where sectoral caps exist

Advantages: – Established distribution / marketing set up of the Indian partner – Available financial resource & contacts of the Indian partners

Wholly Owned Subsidiary• Treated as a domestic company (limited liability) for tax purposes

Advantages: – Provides flexibility of operations

Did you know – 100 of Fortune 500 have R&D facilities

in India

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How can you access India

Foreign concern

Liaison Offices, Representative Offices• No commercial or industrial activity may be undertaken

Branch Offices• Manufacturing and Trading companies may open branch offices • Specific Central Bank approval required • Indian transfer pricing applies

Advantages: – Can acquire immovable property – Post-tax profits freely repatriable

Project Offices• For those that have been awarded an Indian project• Treated as a branch office for tax purposes• No prior permission required from RBI

Did you know – India has the world’s

second largest pharma industry after China

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Key success factors for doing business in India

• Understanding the diversity of the Indian market

• Picking the right locations – Infrastructure – Skill – Customers

• Constant innovation: Investment in R&D • Patience: Harvest the opportunities

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Accessing India – A case study

Key objective Sustainability

Business model Access India: Plotting the

roadmap Infrastructure

Legal frameworkFinancial

investment

Did you know – India is the world’s

second largest small car market

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Accessing India – A case study

Key Objective – Source quality raw materials at a low cost – Manufacture at a low cost for existing customers – Export goods to tap consumer base in India – Manufacture in India & tap the Indian consumer base

Business Model – JV with Indian company – Setup Indian company – Part outsourced – Franchise model

Legal framework - Starting business – Registrar of Companies (ROC) – MoA & Certificate of incorporation – PAN & Tax Account number – Mumbai Shops & Establishment Act registration – Registration for VAT, Profession tax, Employee PF – ESIC (medical insurance) registration

Sustainability – Capacity expansion: Rapid growth – Tackling diversity: Local markets – Improving cost efficiency: High volume - Low value – Investment in R&D: Local innovation

Infrastructure – Location: Government policy – Property: Lease v/s buying – Supply chain & logistics: Trusted partnership – Resourcing: Skill matching – Distribution & Marketing: Market knowledge

Financial InvestmentIf government approval required – Approval by Foreign Investment Promotion Board (FIPB) – Post which below procedure appliesIf automatic approval – Notify RBI within 30 days of receipt of inward remittances – File documents within 30 days of issue of shares30

day

s (M

umba

i)

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Some attractive sectors

Market sectors with the most upside potential in India in the next three years

Source: Investment Climate in BRIC Nov06: Survey of CFA institute members

Basic Materials

Other

Media & Publishing

Transportation

Oil & gas, energy, utilities

Travel, hotel & tourism

Automotive

Health care, biotech & pharmaceuticals

Agriculture, food processing

Capital goods & industrials

Consumer goods & services & retailing

Real Estate

Construction

Communications, technology & telecoms

Banking, finance & insurance

3%

5%

6%

10%

10%

12%

14%

16%

18%

22%

29%

32%

38%

41%

57%

Did you know – India is one of six

countries that launches it’s own satellites

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Section 4 HSBC in India

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HSBC in India

• Coverage with 50 branches• Presence in 29 cities• Plan for over 30 new branches*

The Leading International Bank in India

*Subject to approvals

Kolkata

iabmuM

Chennai

Coimbatore

New Delhi

Ahmedabad Vadodara

Chandigarh

Pune

Nagpur

Visakhapatnam

Trivandrum Kochi

Noida

Gurgaon

Bangalore Mysore

Jaipur

Ludhiana

Hyderabad

Indore

Patna

Raipur

Nashik

Surat Guwahati

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Trade ServicesExport/Import Financing

Documentary Credit

Structured Trade Finance

Instant@dvice

Documentary Collection

9.6% & 9.3% of India’s exports and imports throughput

Business FinanceFinancing of fixed assets and working capital

Local and foreign currency loans

Channel financing

Bill Discounting

Domestic and export factoring

Treasury and Capital MarketForeign Exchange products

Interest rate products

Customised/ structured solutions

Transaction BankingPayments & Cash Management

Global e-banking package - HSBCnet

Host to Host solution - HSBC Connect

End-to-end supply-delivery chain solutions

Coverage of 4000 locations - Over 500 top tier clients

Flexible MIS/Automated Reconciliation Services

A full servicing offering

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Our Approach

We understand that no two businesses are the same

We understand that each one of you have your unique operating environment

We follow the ‘Solutions’ Approach after thoroughly understanding your business

We strive to provide a unique solution of a bundle of products and services on the basis of the life stage of your business

Did you know – India is the largest producer of milk, 2nd largest of food

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Providing the right solution at each stage of the business

– Current Accounts

– Internet Banking

– Access to over 23,000 VISA ATMs

– Trade Services

– Cash Management

– Factoring Solutions

– Unsecured Business overdraft

– Loans against Property

– Relationship Manager

– Transaction Banking

– Forex management / Treasury

– Lending lines for Trade / Working capital

– Escrow Services

– IPO Services

– Term Loans

– Commodities Financing – Growth funding (PE / Capital Mkts)

– Multi currency accounts – Outsourcing (Payroll / Payments) – Seamless cross border banking – Growth funding

(PE / capital markets) – Aquisition Funding /

Investment Banking – Risk management

Initial Stage Growth Stage Consolidation

Start up Stable Business Rapid Growth Niche Market Position Market Leader (Global / Local)

Time Scale

Ban

king

Req

uire

men

ts

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A success story

An international IT consulting company, started in 1999, delivering affordable business and technology solutions. HSBC’s total exposure stands at $100M, growing from $7M four years ago

HSB

C F

acili

ties – Checking accounts

– FX limits

– Working Capital

– Fex limits

– Facilities - $7m

– Term loan

– PCM and Trade

– HSBCnet

– Corporate cards (2k)

– Cross border (SGH, UAE, GER, UK)

– Derivatives

– Collecting bankers

– Aquisition funding

– Dividend payment

– Capex funding ($18m)

– Cross border (Netherlands, AUS, Dubai)

– Total Facilities - $60m+

Cor

pora

te E

volv

es – Aggressive growth – 2 new centers – Acquisition of $10M – Goes Public $ 54M

– 2 new facilities

– Acquisition of $6.5M

2004-05$55m2003-04

$20m

2005-06$102m

2006-07$130m

2007-08$180m

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Key achievements

Best Global Supply Chain Finance Provider 2008 Best Pre-Shipment Financing Solution 2008 Best Internet Trade Finance Bank in Central and Eastern Europe 2008 Best Supply Chain Finance Provider in the Middle East 2008 Best Trade Finance Provider in the UK 2006 - 2009 Best Trade Finance Provider in HK 2002 - 2009 Best Trade Finance Provider in Saudi Arabia 2009 (SABB) Best Overall Bank for Cash Management in Asia 2008 Best Overall Bank for Cash Management in Middle East 2008 Best Bank for Payments & Collections in Asia 2008 Best Bank for Payments & Collections in Middle East 2008

Best Global Trade Finance Bank 2008 Best Islamic Trade Finance Bank 2008 Best Trade Finance Bank in the Middle East and North Africa 2008 Leading Trade Services Bank in Asia-Pacific 2008 Leading Trade Services Bank in the Middle East and North Africa 2008

Best Online Trade Finance Bank 2007 – 2008 Best Factoring House 2003-2008 Best Trade Finance Bank in the Middle East & North Africa 2006 - 2008 Best International Trade Bank in China 2008 Best International Trade Bank in Malaysia 2008 Best International Trade Bank in Pakistan 2008 Best Factor provider Poland 2008 Best Factor provider UK 2008

Best Debt House Turkey Best Domestic Cash Management Bank in India, Indonesia, Malaysia, Brunei, Taiwan and Sri Lanka, 2008 Overall Customer Satisfaction Rated No 1 in Asia, 2008 Best Cash Management House in Asia, 2008 Best Bank in Hong Kong 2001-2008

Best Cash Management Bank in Middle East, & Africa 2008 Best Bank in Asia for Cash Management, 2008

Best Trade Finance Bank in Asia 1999 - 2008 Best Trade Finance Bank in Hong Kong 2008 Best Trade Finance Bank in Taiwan 2008 Best Trade Finance Bank in Vietnam 2008 Most Innovative Trade Solution 2008 Best Transaction Bank in Asia, 2008

Best Transaction Bank in Hong Kong, 2008 Best Cash Management – Hong Kong, 2008 Best Cash Management Bank in Southeast Asia, 2008 Best Bank for Payments and Receivables, 2008

Best Trade Finance Bank in Asia 1997 - 2008 Best Trade Finance Bank in Hong Kong 2008 Best Cash Management Bank in Hong Kong, 2008 Best Foreign Commercial Bank in China Best Foreign Commercial Bank in Vietnam Best Foreign Commercial Bank in Malaysia

Hong Kong – Best Local Cash Management Bank Indonesia – Best Foreign Cash Management Bank Taiwan - Best Foreign Cash Management Bank

Best Trade Finance Bank 2003 - 2008 Cargonews Asia

The Most Innovative Cash Management Provider in Asia, 2008 Best Trade Bank in Asia 2008 – Trade and Forfaiting Review