Posts Tagged ‘Indian OFDI’

Investment Destination Germany: Chances & Challenges for Indian Firms

Wednesday, December 7th, 2011

Investment Destination Germany: Chances & Challenges for Indian Firms


By: Rajnish Tiwari

German-Indian Round Table, Hamburg

c/o Institute of Technology and Innovation Management

Hamburg University of Technology (TU Hamburg-Harburg)

Schwarzenbergstrasse 95, 21073 Hamburg, Germany

Tel. +49 – (0)40 – 42878 3776 Fax: +49 – (0)40 – 42878 2867





Not many industrialized nations weathered out the recent global financial crisis as well as Germany has managed to do. The largest economy in Europe has proved to be an agile and versatile player that can boast of a strong domestic base and privileged access to competitive global markets. Supplemented by its excellent physical infrastructure and outstanding technological capabilities Germany offers attractive opportunities for foreign direct investments (FDI). Many Indian firms, buoyed by the increasing Indo-German cooperation, have made use of these opportunities. However, despite increasing engagement there is still room for realizing potential, yet untapped, by Indian firms in Germany.


The German economy registered an early recovery from the recent global financial crisis, growing by an impressive 3.6% in 2010. The fundamentals of the largest European economy consisting of a gross domestic product (GDP) of nearly € 2.5 trillion and 82 million inhabitants remain strong even though the pace of growth is expected to slow down to some extent in near future.


Germany has been able to quickly adapt itself to the chances and challenges of a globalized world. In the post-reunification period, its GDP has grown from € 1,534.6 billion in 1991 to € 2,498.8 billion in 2010, according to the Federal Statistical Office. In the same period its exports have grown from € 340.4 billion to € 959.5 billion. No wonder, this powerful combination of a strong domestic base and successful foreign trade with the “made in Germany” brand has kept attracting many foreign investors to Germany. In fact, a recent worldwide survey (May 2011) by consultancy firm Ernst & Young has found Germany to be the most attractive FDI location within Europe.


As a consequence of such developments, a growing number of firms from economically emerging countries, such as the BRIC nations, have started discovering Germany as a destination of choice for their FDI. Indian firms buoyed the by sustained economic growth of the previous years have been at the forefront of emerging market investors in Germany with close to 200 subsidiaries and over 23,000 employees on their payrolls.


There are several reasons for Indian firms’ overseas expansion. Exposure to global competition has forced firms to seek world-class technological and managerial capabilities. At the same time, domestic and overseas success has put significant slack resources at their disposal. To give an example, the cumulated total profit of Indian firms has increased more than 10-fold between fiscal years 2000/01 and 2007/08, from $ 7.3 billion to $ 74 billion, according to an Annual Survey of Industries, released last year. Encouraged by government support to outward FDI Indian firms have rapidly emerged as a significant source of FDI. Between March 2001 and Sept. 2010 India’s outward FDI stock has increased more than 34-fold, from $ 2.6 billion to $ 89.2 billion according to official data.


In a significant contrast to their Chinese counterparts Indian firms have so far tended to prefer developed Western countries for their investments. Germany, along with the USA and UK has emerged as a primary target for Indian FDI. The largest economy in Europe provides not only attractive market opportunities. With its established technological prowess, high-quality infrastructure and reliable institutional set-up, Germany is regarded as an excellent investment target by many Indian firms in their pursuit of newest technologies and commercially viable cutting-edge innovations. The two countries enjoy increasingly cordial bilateral relations as witnessed by the regular holding of “India Weeks” in cities like Stuttgart, Cologne and Hamburg.


Indian FDI in Germany


Since many Indian companies prefer to channelize their FDI projects to Germany through their existing domestic subsidiaries or through their daughter concerns in other European countries, the official data fail to capture the true extent of Indian engagement in Germany. The present stock of Indian FDI in Germany, after factoring-in such “indirect” FDI channels, is estimated at about € 4.2 billion. Even though recent years have not seen many “big-ticket” investments coming to Germany, there have been several instances of medium-sized FDI projects, such as by Apollo Tyres, Motherson Sumi, the Essar Group, and Kiri Dyes and Chemicals. Also, wind turbine manufacturer Suzlon has continued to intensify its engagement with Hamburg-based REpower Systems. The largest group of Indian firms in Germany (49%) comprises of firms broadly categorized as information technology (IT) firms offering software & engineering services. Other important groups include Automobile & Parts (13%), Manufacturing (11%), and Pharma & Biotech (11%). Indian investments are generally concentrated in the federal states of Hessen, North Rhein-Westphalia (NRW), Baden-Württemberg, Bavaria, and Hamburg. Federal states located in Eastern Germany have so far received less than their fair share of attention by Indian investors even though they generally offer excellent opportunities in terms of infrastructure, financial incentives, and political and administrative support.


Indian Firms in Germany tend to evaluate their performance positively. In a survey conducted by this author at the Hamburg University of Technology, nearly two-thirds of the respondents reported their German operations to be successful. Survey participants were asked about average growth in turn-over, profitability and head-count in previous 3 business years. Most firms reported moderate to high success. Whereas 2 survey participants reported high or hyper success on all counts, none had a negative or zero growth for all indicators. However the growth in turn-over did not necessarily lead to higher profitability and or higher headcount.

Figure 3: Average firm growth for 3 key indicators in past 3 fiscal years

In few instances firms reported post-acquisition difficulties such as lower turn-over, increased attrition, extended recruitment time, or reduced quality perception by customers. The silver lining on the wall, however, was that these developments did not seem to be systematic to all Indian acquisitions. Especially firms with a longer presence in Germany or having a higher degree of local management were less likely to face such difficulties. Post-acquisition success therefore seems to correlate with managerial actions and image perceptions in the market.


A comparative analysis showed that firms were more successful when they could muster organizational capabilities to overcome regulatory and bureaucratic hurdles and find a right mix of strategic and operational autonomy. Companies that competed solely on the basis of lower price were found to be on a disadvantage vis-á-vis firms that had an enhanced focus on superior quality and image. Successful firms were more often able to attract and retain local talent. Finally, the ability to bridge cross-cultural gaps in the working styles of the headquarters and the German subsidiary played an important role in success.


Utilizing Unrealized Potentials


Considering the generally positive experience of the Indian firms already present in Germany, one gains the impression that Indian investments of late have struggled to keep pace with the rapidly growing economic ties between the two countries. As demonstrated earlier, Germany with its strong and affluent consumer base, outstanding export credentials, and proven technological prowess could be an ideal partner for Indian firms and entrepreneurs looking to expand their businesses and tap into new markets.


In my opinion, Indian firms would be well advised to take advantage of Germany’s excellent physical infrastructure and technological know-how, including in the eastern part, while combining it with their own strengths in production, marketing, low-cost engineering, and business model innovations. Complementary capabilities of the two countries, for instance, could be utilized by Indian firms to develop world-class “frugal innovations” with characteristics that are environment friendly and relatively price worthy. Such innovative products would be ideally destined for competitive global markets apart from the two local markets.


Summarizing, we can say that Germany offers attractive investment opportunities for Indian firms even as the economic ties between the two countries intensify. Many Indian firms have already realized the chances. Still there is a lack of awareness about the chances and challenges present in Germany. Even though Germany is certainly not a cakewalk for Indian investments owing to geographical, cultural and linguistic distances, it is thoroughly possible to achieve success with careful analysis of the market conditions, identification of synergies, and with suitable management practices.




About the author:


Rajnish Tiwari is Head of the German-Indian Round Table (GIRT) in Hamburg. He leads the research project “Global Innovation” at Hamburg University of Technology (TU Hamburg-Harburg) and specializes in Indo-German economic relations. He has conducted several studies on Indian FDI in Germany and India’s emergence as a global innovation hub.



This article appeared in the Business Guide Germany India 2011/2012, pp. 96-97 of Wegweiser Verlag, Berlin. A digital copy can be downloaded from:

Indian Investments in Germany: Innovation and R&D gain momentum in a stable partnership

Wednesday, December 7th, 2011

Indian Investments in Germany:
Innovation and R&D Gain Momentum in a Stable Partnership


By: Rajnish Tiwari

Hamburg University of Technology

Institute of Technology and Innovation Management

Schwarzenbergstrasse 95, 21073 Hamburg, Germany

Tel. +49 – (0)40 – 42878 3776 Fax: +49 – (0)40 – 42878 2867



(August 2011)


Growth in Indian firms’ investments in Germany, by and large, continued to stay on a stable course between September 2010 and August 2011, since our last report in the IGCC Annual Review. In a maturing market we could observe some significant investment projects and a new and positive dimension in Indian subsidiaries’ operations in Germany: Ever more firms are discovering the merits of using Germany’s technological expertise and infrastructure for augmenting own R&D capabilities and innovation portfolios. This trend is fostered by the excellent growth that many Indian firms are witnessing in Germany at present.




The recent financial crisis in the Euro zone notwithstanding Germany has emerged as a reliable economic powerhouse growing by an impressive 3.6% in 2010. A powerful combination involving a strong domestic base of 82 million consumers with relatively high purchasing power at their disposal, the world’s fourth largest gross domestic product (GDP) of nearly € 2.5 trillion, and the successful “made in Germany” brand in foreign trade keeps attracting many overseas investors to Germany. For instance, in May 2011, a worldwide survey by consultancy firm Ernst & Young declared Germany to be “the” most attractive FDI location within Europe. Not surprisingly, it has become the second largest recipient of foreign direct investments (FDI) in Europe, and the sixth largest recipient globally, having received over $ 46 billion (approx. € 35 billion) in FDI from foreign firms in 2010 as a recent report from UNCTAD reveals.


At the same time, private sector Indian firms, in their pursuit of expansion opportunities and technological know-how, have rapidly emerged as a significant source of FDI. In the 10-year period between March 2001 and March 2011 India’s outward FDI stock has increased nearly 38-fold, growing from $ 2.6 billion to $ 98.2 billion, according to official Reserve Bank of India (RBI) data. A more realistic figure can be expected to be on a significantly higher side because many FDI projects are carried out by overseas subsidiaries on behalf of the “mother” firm back home and are not necessarily incorporated in the official government data. Buoyed by the sustained economic growth of the previous years, Indian firms have been at the forefront of emerging market investors in Germany. According to one KPMG report more than every fourth acquisition in Germany (27%) carried out by an emerging market investor has Indian roots, followed by a distant second Russia (17%), and much ahead of China (5%).


Recent Developments in Indian FDI in Germany


Even though the official figures of the German Bundesbank continue to show significantly lower figures owing to statistical problems in officially assigning investment figures to firms with complex holding structures, global operations, and utilizing both local and global financing instruments, the stock of Indian FDI in Germany is estimated to stand at about € 4.5 billion as of August 2011. At least 11 FDI projects could be monitored between September 2010 and August 2011. These projects had an estimated volume of about $ 325 million.


Six of the projects were greenfield investments (including follow-up investments) while the others involved acquisitions. The Ruia Group (Meteor Gummiwerke), Thermax Ltd. (Omnical Kessel- und Apparatebau GmbH), and Hindustan National Glass and Industries (Agenda Glas AG) were amongst the major acquirers in Germany in this period. The Hinduja Group, too, made an unsuccessful bid to acquire German power company Steag with estimated assets of approx. € 3.5 billion. Wind energy firm Suzlon decided to increase its stake in Hamburg-based REpower Systems SE from 91.7% to 95.16% with an intention to acquire the full control.


Interestingly, the federal state of Mecklenburg-Vorpommern saw two Indian investments (by Suzlon in a joint venture with its own subsidiary REpower, any by Kenersys) in the field of wind energy, thus underscoring the potential that the regions in the eastern part of Germany hold for Indian firms.

Table 1: Developments in Indian FDI in Germany between January 2009 and August 2010

Key indicators Aug. 2010 Aug. 2011
No. of Indian MNCs in Germany 134 139
No. of subsidiaries of Indian MNCs in Germany 190 195
Full time regular employees of Indian MNCs in Germany* 18,600§ 22,000
Estimated stock of Indian FDI in Germany € 4.125 billion € 4. 5 billion


* This figure does not include the approx. 3,600 employees of the Luxemburg-based Mittal Group.

§ This figure has been re-adjusted after getting authoritative data on Corus / Tata Steel’s employement.


Taking into consideration the investments and divestments in this period we could count 139 India-headquartered MNCs and their 195 subsidiaries (majority stakes and wholly-owned businesses) active in Germany as of August 2011. This figure also does not include holding companies and dependent firms within given concern structures.


Employment in Germany


Subsidiaries of Indian firms in Germany are estimated to have approx. 22,000 regular employees on their payroll on a full-time annual average. Additionally, there were about 1,000 trainees and interns, which are not included in the figures below.



Table 2: Top-5 Indian employers in Germany in fiscal year 2009-10


No. German Firm Indian Stakeholder Employees


Meteor Gummiwerke Ruia Group



Novelis Deutschland GmbH Hindalco (Aditya Birla Group)



SONA BLW Präzisionsschmiede GmbH Sona Group



REpower Systems SE Suzlon Energy Ltd



Corus Deutschland GmbH Tata Steel



Source: Author’s compilation based on companies’ last available official annual report.


This figure has been re-adjusted after having estimated the number of employees of Indian firms as standing at 23,600 the previous year. The authoritative headcount of Tata Steel (Corus) has been found to stand at a much lower 1,166 than the one reported last year in this space (6,100), which was based on an online database entry that was apparently erroneous. The new figure is based on an annual report filed by Tata Steel.


It may also be noted that the total employment provided by the business group of the Indian stakeholder might be much higher. For example, conglomerates such as the Ruia Group and the Tata Group, have multiple presence in Germany and their total employment would stand at significantly higher than the figures above suggest.


Performance of Indian firms in Germany


Germany seems to provide a highly attractive yet challenging playground for Indian firms. While analyzing annual reports of about 50 Indian subsidiaries for fiscal year ending in 2010 or 2011 we find examples of both high growth and severe struggle. While firms generally coped well with the given market parameters, some firms managed to outperform the market growing with a double-digit figure exceeding 20%. At the same time a few firms (e.g. logistics, automobile ancillaries, and clinical research) recorded negative growth in the turn-over exceeding well over 20%. In one instance the firm suffered a severe setback with the turn-over decreasing on a year-to-year basis by as much as over 75%, coming down to less approx. € 2.5 million from over € 10 million. Such incidences underscore the competitive and challenging nature of the German market and the subsequent need for continuous alert. Generally, firms having a broader customer base, experienced local management, collaborative practices, and a supportive business network consisting of suppliers, customers, institutional players, and other firms are less prone to such abrupt shocks.


R&D and Innovation

Slowly but surely Indian firms are recognizing the need of cutting-edge technologies and an innovative product portfolio in a competitive globalized world. While some FDI decisions are directly motivated by the desire to seek access to technological know-how, in other instances technological set-up such as a functioning Research and Development (R&D) department is acquired as a package deal. At any rate, we can now observe several Indian firms actively making use of Germany’s advanced engineering capabilities and technical infrastructure.


For instance, while Tech Mahindra has opened a development centre in Bonn, Suzlon and REpower Systems SE have founded a joint venture called Renewable Energy Technology Center (RETC) with offices in Hamburg and Rostock with an express purpose of doing basic research in the field of renewable energies. REpower itself provides an excellent example of successful R&D by Indian subsidiaries in Germany: In fiscal year 2010/11 it increased its R&D expenditure by over 40% from € 25.6 million in the previous year to € 36.9 million. Its annual report proudly mentions successful commercialization of several new products. The R&D efforts also paid rich dividends in that the firm could generate € 7.5 million in license fee (0.6% of the total turn-over). Some of the firms, apart from those listed in

Table 2, participating in the “global innovation” value-chain in Germany are listed below:


Table 3: Examples of some Indian firms with successful R&D activities in Germany


No. German Firm Indian Stakeholder Products/Patents
1 MBE Coal & Minerals Technology McNally Bharat


2 Minda KTSN Plastic Solutions Minda Group


3 Ecron Acunova GmbH Manipal Acunova


4 Eisenwerk Erla GmbH Dynamatic Group


5 Lloyd Dynamowerke Kirloskar Group



Source: Author’s compilation based on companies’ last available official annual report.


One interesting aspect, though, is that apart from Tech Mahindra hardly any other big IT company from India is using Germany for innovation and R&D activities. Most firms are singularly focused on delivery, which probably has been the reason why their growth has not yet realized its full potential.



As evident from the data described above, India is not only “the” top emerging economy investor in Germany but also that Indian investments here have remained stable with an increasing monetary volume. At the same time however, one gains the impression that the Indian FDI in Germany has not kept pace with the rapid growth of overall Indian overseas investments. The reason for this development might be three-fold:

  • First, Indian firms, of late, have started to look “south”, i.e. to other developing countries as investment destination. This finding is also corroborated by a KPMG study.
  • Second, economic recovery in Germany has reduced financial woes of firms so that the general availability of distressed assets has gone down shrinking the pool of suitable acquisition targets.
  • Finally, Indian firms continue to demonstrate a strong preference for acquisitions in Anglo-Saxon countries. According to the Emerging Markets International Acquisition Tracker (EMIAT) of KPMG as much as 64% of all developed country acquisitions by Indian firms in 2010 were carried out in 4 Anglo-Saxon countries (USA, UK, Canada and Australia), with USA alone cornering a lion’s share of 35%.


The EMIAT data also reveal that even though Germany remains highly preferred by Indian firms outside the Anglo-Saxon countries, France and Singapore are beginning to challenge Germany’s attractiveness for Indian firms. Therefore, it seems appropriate to call upon both firms and institutional players in Germany and India to further work on maintaining the momentum of the growing bilateral relations. The “win-win” proposition of the bilateral cooperation is very much self-sustaining. Germany’s excellent physical infrastructure and innovation prowess and India’s strengths in production, marketing, low-cost engineering, and business model innovations can generate a unique competitive advantage.


Summarizing, we can say that Germany has established itself and continues to be a preferred and stable partner for Indian firms in their pursuit of overseas growth and technological advancement. The growing R&D engagement of Indian firms in Germany is a welcome sign for bilateral technological collaboration on the path of sustainable development with positive effects for all concerned. Furthermore, it underscores that globalization is not a one-way street and that high-tech jobs can withstand the cost pressure. Collaboration and cooperation, therefore, works both ways and we might be entering an era of “Indian innovations, made in Germany”.


About the author

Diplom-Kaufmann Rajnish Tiwari is a Research Associate at the Institute for Technology and Innovation Management at Hamburg University of Technology (TUHH). He has done extensive research on Indo-German business relations especially in the knowledge-intensive field of innovation collaboration. Additionally, he heads the German-Indian Round Table (GIRT) in Hamburg and is one of the founding partners of the initiative “India Week Hamburg” which was started in 2007.


This article appeared in the “Annual Review 2011” of the Indo-German Chamber of Commerce, pp. 119-123. A digital copy is available at:  (PDF, approx. 1 MB)

Infosys reportedly gave up China investment plans for IPR fears on clients’ side

Sunday, September 11th, 2011

According to a news item appearing the Economic Times (7th Sept. 2011) Indian IT major Infosys gave up its plans for increasing foreign direct investment (FDI) in China as its major customers in Europe and the USA had apprehessions about their data procession and/or software-related work being done in China owing to fears about the protection of intellectual property rights.

The report cites as source a US diplomatic cable which has been released by WikiLeaks. It also narrates an incidence, which N.R. Narayana Murthy, Co-founder of Infosys reportedly told US diplomats:

Murthy said he understood the misgivings of his clients and narrated his experience in China to show how rampant piracy was. Stepping out of his central Beijing hotel to go for a stroll with Peter Bonfield, then CEO of British Telecom, they encountered a sidewalk vendor selling pirated Microsoft and Windows products.

Bonfield jokingly asked the vendor if he had Finacle (an Infosys banking software product) and the vendor replied: “I can get it for you tomorrow.”

Murthy, was at the same time quite clear about China’s potential, its qualities, and HR problems that it faces, as is clear from the next section:

Murthy, however, was optimistic about the long-term potential of China. As per the cable, he stated: “There is nobody better than the Chinese at solving a problem once they are serious about it.” Murthy said it would take four to five years for the Chinese to overcome that reluctance.

There were other concerns for Infosys to expand in China. Murthy told the diplomats that though qualified graduates were available, those with sufficient English skills commanded a high premium. He said retention was more difficult in China than in India, as Chinese professionals are more willing to leave for a higher salary where Indian ones value institutions a bit more.

The whole report is available at: The Economic Times (11.09.2011)

“India, Germany may witness more deals over next two years – analysis”

Wednesday, May 25th, 2011

“Over the next two years, the deal flow between India and Germany, both inbound and outbound, is likely to increase manifold with the availability of distressed targets in Germany and the Indian government opening up such sectors as retail to foreigners, according to German and Indian bankers.”

This says a report in mergermarket, which is a part of the Financial Times Group. The report written by Sounak Mitra & Sarah Syed quotes several other studies and field experts to stress the points. The report also quotes the research carried out at Instituute for Technology and Innovation Management at Hamburg University of Technology (TUHH).

[…] According to Rajnish Tiwari, a research associate at the Institute for Technology and Innovation Management at Hamburg University of Technology, between March 2001 and March 2010, India’s outward foreign direct investment (FDI) stock increased to USD 77.6bn from USD 2.6bn. The stock of Indian FDI in Germany was estimated at about EUR 4.125bn as of mid-August 2010.

Some 12 FDI projects could be monitored between January 2009 and mid-August 2010 with an estimated volume of about USD 125m. Six projects were greenfield while others involved buys.

According to Tiwari’s data, there were 134 India-based multinational companies and their 190 subsidiaries active in Germany as of August 2010. Of the 134 companies, ICT and consulting comprised 49%, automotive and parts made up 14%, pharmaceuticals were 11%, manufacturing consisted of 10%, 4% textiles, 4% travel and logistics, 2% banking and finance, and 6% others.

The full article is available under:

Indo-Hamburg Relations: On A Promising Path?

Tuesday, April 19th, 2011

GIRT Hamburg invites Consul General Subashini to share views on India’s ties with Hamburg, on May 2, 2011

Hamburg (19.04.2011): India’s emergence as an increasingly open and growing economy has led to a more active interaction with Germany. The liberalization of India’s economy and the ensuing growth in the bilateral trade has opened new avenues for cooperation not only in the business sector but also in other social and cultural spheres.

The Hanseatic City of Hamburg takes a leading role in Germany’s engagement with India, owing to its ideal match to India’s sunrise industries in the field of maritime economy, civil aviation, logistics, and – not the least – in renewable energies. Hamburg’s trade with India grew by over 100% between 2005 and 2009, and over 10% of Germany’s total trade with India involves Hamburg. On the cultural front, too, Hamburg has taken a pioneering role with its strong India connections and with the regular organization of the “India Week” that has a strong cultural component.

German-Indian Round Table in Hamburg is therefore pleased to host Mrs. M. Subashini, India’s Hon’ble Consul General in Hamburg, to share her perspectives on the strong and growing relations between Hamburg and India and the future course that these relations are expected to take. Mrs. Subashini will also shed light on some new policy measures in India that are relevant for the business community here and especially for the members of GIRT.

The event will take place on May 2, 2011, at 18:30 hours. As a new experiment the event will be hosted in the premises of a member firm of GIRT. After the talk by Mrs. Subashini the participants will have time for a small get-together and networking. Details of the venue will be mailed to the confirmed participants. Participation in this event is possible by invitation. Those interested in receiving an invitation may write to by April 27, 2011. We look forward to welcoming an interested and interesting audience!

Since seating capacity is limited we require binding registration and will send the confirmed participants a written affirmation of the registration prior to the event.


About German-Indian Round Table (GIRT)

The German-Indian Round Table (GIRT) was founded in 2001 and forms a loose federation of businessmen and entrepreneurs with strong ties and interests in India. GIRT is targeting to inform about India and strengthen Indo-German business relations. Members of GIRT support cultural and social activities related to India. German-Indian Round Tables are organised regularly in Aachen, Berlin, Düsseldorf, Frankfurt, Hamburg, Hanover, Leipzig/Halle, Munich, Nuremberg, Stuttgart und New Delhi/Gurgaon. GIRT connects about 3,000 people from the Indo-German business community. The head of the local GIRTs and the speakers work on a non-profit basis. Since February 2010 Dr. Andreas Waldraff from Berlin is the chairman of the GIRT. (Further information: /

The Hamburg Chapter of GIRT is headed by Mr. Rajnish Tiwari from Hamburg University of Technology (TU Hamburg-Harburg). Mr. Tiwari works there as a Research Associate at the Institute for Technology and Innovation Management and leads the Research Project “Global Innovation” ( He has done extensive research on Indo-German business relations and is a co-initiator of the India Week in Hamburg (

Press Contact:

Rajnish Tiwari (Phone: +49 (0)40 42878 3776,

Sven Andressen (Phone: +49 (0)421 1617708,

(Download press release, PDF, approx. 170 KB)