Outbound FDI from India rises 3x to $12 billion in April-June quarter

A V-shaped recovery in the Indian economy has whetted the appetite of Indian businesses to go for bigger foreign bets. From large private companies like Reliance, Tata and Wipro to public sector majors like ONGC Videsh, India Inc. has raised its game and is going full steam ahead with its global ambitions.

The Covid-19 pandemic and the spate of local-level lockdowns in many states across India doesn’t seem to have affected the appetite of Indian businesses for foreign acquisitions as well as further investments in existing businesses in foreign countries.

According to data collated from the Reserve Bank of India (RBI) website, Indian businesses made outbound foreign direct investments (FDI) of $12 billion in the first quarter of 2021-22. This is a three-fold increase over the outbound FDI of $4.15 billion in the corresponding April-June quarter in the previous financial year.

Figures show a marked increase in each of the three months

The data shows a marked increase in outbound FDI in each of the three months under consideration. In April 2021, India Inc. invested $2.51 billion in buying new businesses or investing in existing ones abroad, compared to $1.21 billion, marking a two-fold increase this fiscal.

In May this year, the figure was $6.71 billion, a more than 300 per cent rise over the figure of $1.55 billion in the previous corresponding month, the RBI data showed. And in June, the outbound FDI figure more than doubled to $2.80 billion from $1.39 billion in the year-ago period.

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Investments were in the form of equity, loans and guarantees

During the period under review, Indian companies invested $2.37 billion in equity, advanced $3.10 billion as loans and provided guarantees worth $6.55 billion as part of their outbound FDI. The corresponding figures for the first quarter of 2020-21 are $1.10 billion as equity, a similar amount as loans and $1.95 billion as equity, a collation of the data available on the RBI website revealed.

The list of investors includes some of the best known Indian companies and business houses. In June, the Tata Group led the charge with investments of $1 billion in a wholly owned subsidiary of Tata Steel in Singapore and $131.25 million in a wholly owned Tata Power unit in Mauritius.

Reliance Industries, controlled by Asia’s richest man Mukesh Ambani, invested $56 million in its wholly owned Singapore-based agriculture and mining firm. It invested a further $35 million in other wholly owned subsidiaries and joint ventures in the US, the UK and UAE.

Indian software services giant Wipro, under its new CEO Thierry Delaporte, poured $787.5 billion in its wholly-owned subsidiary in the US in June this year.

Public sector also joined the bandwagon

The Indian public sector was also active during this period. ONGC Videsh, the overseas investment arm of India’s national oil explorer ONGC, invested almost $100 million in its joint ventures in Russia and Mozambique. It invested $48.70 million in the former and $48.31 million in the African venture.

Then, Interglobe Enterprises, which owns India’s largest airline IndiGo, invested $51.5 million in a joint venture in the UK.

Among others, the Kolkata-based Paharpur Cooling Towers invested $48 million in a wholly owned subsidiary in Singapore, Tata Communications poured $50 million in its wholly owned subsidiary in Singapore and WNS Global Services invested $45 million in a joint venture in the Netherlands.

The data revealed that auto components maker Motherson Sumi Systems invested $41.70 million in a fully-owned subsidiary in the UAE and Varroc Engineering poured $65.5 million in a wholly owned unit in the Netherlands.

The data is, however, provisional and the RBI said it is subject to change based on the online reporting by the authorised dealer banks.

Nomura data shows a V-shaped recovery

The RBI data on outbound FDI further corroborates improving economic fundamentals of the Indian economy that is whetting the risk appetite of the country’s entrepreneurs.

According to data released by Japanese brokerage firm Nomura, business activity in June 2021 has shown a V-shaped recovery compared to May this year. The Nomura India Business Resumption Index (NIBRI), which measures mobility indices and power consumption, among others, accelerated to 96.4 for the week ended July 18, from 94.9 the previous week.

The firm, however, warned that the slowing pace of vaccinations and the possibility of the third wave of Covid posed significant downside risks to the Indian economy.