DOING BUSINESS IN INDIA An Italian Story INDIA

DOING BUSINESS IN INDIA An Italian Story

INDIA – ITALY BILATERAL RELATIONS Trade: Import/Export between Italy and India (From 13 -14 to 17 -18 in USD millions) Year 13 -14 14 -15 15 -16 16 -17 17 -18 EXPORT 5, 272. 75 5, 092. 31 4, 217. 72 4, 902. 18 5, 709. 86 -3. 42 -17. 17 16. 23 16. 48 4, 231. 81 4, 072. 22 3, 895. 01 4, 706. 88 1. 81 -3. 77 -4. 35 20. 84 9, 324. 11 8, 289. 94 8, 797. 18 10, 416. 74 -1. 12 -11. 09 6. 12 18. 41 GROWTH % 4, 156. 61 IMPORT GROWTH % 9, 429. 36 TOTAL TRADE GROWTH % Source: Ministry of Commerce and Industry, Go. I (2018 ) • FDI: Foreign Direct Investment inflow from Italy to India from FY 2013 to FY 2017 (in USD millions) 364 400 350 300 250 200 150 100 50 0 • 279 185 167 • 63 FY 2013 Source: UNCTAD (2018) 2 FY 2014 FY 2015 FY 2016 FY 2017 Italy (among India's top 5 trading partners in the EU) is currently the 13 th largest investor in India with a presence of more than 650 firms. Two way trade between the countries stood at USD 8. 28 billion in 2015 -16. and India has attracted around USD 2. 23 billion FDI from Italy from 2000 to 2016. Trade and investment from Italy has been spurred by government initiatives including GST and Make in India but mostly due to strengthening of economic-political ties in the last 2 years.

ITALIAN COMPANIES IN INDIA Dimensions of Italian Companies in India Approximately 650 Italian Companies are Currently operating on the Indian Territory (2017) Wholly Owned Subsidiaries Corporates 700 Joint Ventures Rep. Offices Branch Offices Project Offices Growth of Italian Companies Operating on the Indian Territory (2017) 650 30% 70% • The number of Italian firms in India has increased over the last 10 years seeing their presence doubled from 2008 to 2017. • In 2017 Italian companies in India were about 650 as compared to German companies (1, 500) and French companies (750). 600 500 400 330 21 % 300 200 63 % 100 0 2008 Source: PWC, FICCI 3 2012 2017 Multinational s

ITALIAN COMPANIES IN INDIA: RELEVANT SECTORS (2017) FDI: Sector Concentration 21% 25% IMPORTS: Sector Concentration 2. 33% 2. 37% 5. 13% 3. 25% 12. 99% 11. 84% 3. 66% 8% 3. 39% 7. 90% 15% 13% 39. 08% 3. 70% 19% Industrial Machinery/Equipment Automotive/Auto Components Construction and Material Fashion and Accessories Source: Infomercatiesteri(MAECI) 4 4. 36% Minerals and derived products Food Products included agri Textile, leather Chemical products Pharma and Drugs Rubber and all related Products Metalurgic and metal produce (No Machinery) Computers, ICT Electric Machines Industrial Machinery Automotive Industry

ITALIAN COMPANIES IN INDIA: CONCENTRATION Location of Italian Companies in India (By City - Estimated) Bangalore 13% 5% 11% 6% 4% 4% 12% Gurgaon 15% Kolkata Mumbai 14% New Delhi Pune Maharashtra 45% New Delhi District Tamil Nadu Karnataka Noida 31% • Chennai 13% Location of Italian Companies in India (By State - Estimated) 4% Other 22% Other cities Maharashtra is the state registering the highest presence of Italian companies. ( «Triveneto» of India) • Maharashtra is the powerhouse of Indian Economy accounting for 15% of the GDP; 25% of Indian exports, 30% of FDI into India (50% of FDI in India in 2017) and is the fastest growing state with a planned to growth rate of more than 10%. • Maharashtra is one of India’s most important industrial Hubs offering possibilities in sectors including infrastructure, manufacturing, ICT, agriculture, food processing, Automotive and Industrial machinery. It is also the food basket of India. • There are enormous investments planned including: $10 Bn in railway infrastructure, $5 Bn in new 5 airports, and $15 Bn in new expressways and port connectivity (Mumbai is already the biggest entry port in India).

ITALIAN COMPANIES IN INDIA: RELEVANT SECTORS Italian Companies in India: Examples Sector Industrial Machinery and Equipment Danieli & C. Bonfiglioli Riduttori, Meccanotecnica Umbra, Sea Utensili Diamantati, Rossini, Montanari, Coesia Automotive and Auto. Components Piaggio, FCA, Ducati, Carraro, Dell’Orto, Brembo, Magneti Marelli Constructuion (Including Infrastructure) Italcementi, Saaipem, Soilmec, Salini Impregilo, Maire tecnimont Food & Beverage • Italian Companies Others (Renewable Energy, Environmental Technologies, Pharmaceutical) Italian Companies have Ferrero, Bauli, Lavazza, Perfetti, Barilla (Export), Zanetti(Export) Archimede Solar. Energy, Enel Green Power, Ravano Green Power, Renovo, Saceccav, A. Menarini, Angelini, Sigma-Tau Popular Destination of Italian Companies In India & Pune • The most popular destination for Italian companies in India are NCR region that includes Delhi-Noida-Gurgaon (Around 150 companies) and Mumbai. Pune Corridor (arround 300 companies). an enormous opportunity to make a difference in sectors such as: Industrial Machinery & Components(2° biggest producer in Europe), Packaging, Food Processing, Cold Chain Technology, Infrastructure where demand in India is really high for Technological advancement and development. 6

ITALIAN COMPANIES IN INDIA: GROWTH COMPARISSON BETWEEN CORPORATES AND SMEs (In Millions of USD) F&B 250 200 150 100 50 0 -50 Auto. Components 80 60 40 20 FY 14 -15 FY 15 -16 Turnover EBITDA FY 16 -17 0 FY 13 Profit FY 14 Turnover FY 15 EBITDA Ind. Machinery Profit Ind. Machinery 2 12 10 8 6 4 2 0 -2 1. 5 1 0. 5 0 -0. 5 -1 FY 13 -14 FY 14 -15 Turnover 7 FY 16 FY 15 -16 EBITDA FY 16 -17 Profit FY 12 -13 FY 13 -14 FY 14 -15 FY 15 -16 FY 16 -17 Turnover EBITDA Profit

ENTRY VEHICLES Indian Market: means of penetration Le imprese e gli investitori esteri possono penetrare il mercato indiano con le seguenti modalità: Liaison Office (LO) Foreign Corporates Branch Office (BO) Project Office (PO) Direct Entry Società interamente controllata (WOS) Indian Corporates Indian Market Penetration Limited Liability Partnership (LLP) Importer Indirect Entry Franchisee C&F Agent 8 Joint Venture (JV)

ITALIAN COMPANIES IN INDIA: ADVANTAGES OF THE INDIAN MARKET Government Initiatives «Make in India» Favorable FDI Policy Lower Costs of Production Untapped Sectors Strong Economic Relations Need for Technological Advancement ADVANTAGES Knowledge Oriented Manpower Macroeconomi c Stability Demographic s: Rising Middle Class & Higher Class Consumers 9 Stable Political and Legal Systems Increases in Disposable Income and Changing Taste Large Consumer Base

ITALIAN COMPANIES IN INDIA: POTENTIAL RISKS OF THE INDIAN MARKET Wrong Mode of Entry Wrong Positioning on the Market Impatience for ROI Selection of Wrong Partner POTENTIAL RISKS Incorrect Selection of Human Capital Protection of IP and Technology Cultural Differences 10 Non Compliance to Laws and Regulations Bureaucratic Barriers

MITIGATING POTENTIAL INVESTMENT RISKS IN INDIA Wrong Mode of Entry • Choosing the correct entry vehicle will ensure durable and successful business in India in the long run. Many of the biggest Italian companies have made the mistake of entering the market without a proper business plan, hampering business for many years. Selection of Wrong Partner • Selecting the right partner is crucial in ensuring ROI and growth within the country in the long run. By entering the market with no guidance many foreign companies have established agreements with the wrong partners causing loss of sensitive technology, business and opportunities. Non Compliance to Laws and Regulations • With no or wrong guidance of the law and regulations, non compliance is causing an increase in costs resulting from fines, heavy penalties and black listing. Selection of wrong advisory partners can also result into heavy losses as well as negative cash flows. Protection of IP & Technology • While investing in a JV in India the protection of IP and Technology is highly crucial in order to reap the advantages from the investment. It is important to have a proper drafting and review of all legal documentation in order to correctly protect the technology and know-how of the foreign investor. Bureaucratic Barriers • Bureaucratic barriers are quite high in India. Creating the right network could help reduce the barriers in order to speed up business and not lose out on great opportunities. 11

MITIGATING POTENTIAL INVESTMENT RISKS IN INDIA Cultural Differences • Business in India may be hampered by the cultural differences existing between the home country of the investor and Indian culture. When investing in India it is crucial to understand the surroundings, the habits and way of doing business. A correct understanding of the same will allow business to develop exponentially. Incorrect Selection of Human Capital • While operating in India cultural difference may also induce wrong Hiring of personnel in one’s subsidiary. This could greatly hinder performance and induce other risks as mentioned above in terms of accounting and correct strategies. It is therefore important to have a correct advisor on ones side to assist the company in its doings by being the eyes and ears on the market. This could ensure protection of the interest of the foreign entity investing in India. Impatience on the ROI • India is a market of great opportunity as the market grows at an incredible rate The return from this opportunity will need the necessary time to be reaped. Investments will be have beneficial returns after 3 -5 years of operations. Patience is thus one of the most crucial aspects to be taken into account. Wrong Positioning on the Market 12 • Wrong positioning on the market could hinder long time growth and affect return on investment. Proper advisory by an individual in India could help the foreign company correctly perceive the correct positioning on the market.

OUR SERVICES 1. 2. 3. 4. 5. 6. Market Entry in India Legal services Tax services Audit and Assurance Advisory services M&A

MARKET ENTRY IN INDIA 1 Preparation of the expansion strategy by studying the market size, key demand drivers, trends, government policies and regulations and other critical aspects, by evaluating the opportunities and risks with a structured approach, which includes market assessment and market report. Preparation of Market Reasearch , Entry Strategy Planning and execution of Partner Search for distribution, JV or M&A.

LEGAL SERVICES 2 ü Contract drafting & contract monitoring/management ü Drafting of legal documentation related to company incorporation and execution ü Document review and litigation services ü Legal advisory and support services ü Legal research and legal publications ü Paralegal support services and medico-legal support services ü Bankruptcy filing ü Legal pleadings services ü Copyright, trademark and patent applications drafting ü Intellectual property research- substantive

TAX SERVICES 3 ü Planning and Advisory ü International Taxation ü Expatriate Taxation ü Transfer Pricing ü Representations

AUDIT AND ASSURANCE 4 ü ü ü ü ü Statutory Audit Tax Audit Transfer Pricing Audit Internal Audit Management and operational Audit Process Audit Internal Financial Control over Financial Reporting (IFCFR) Investigative and Forensic Audit Information systems Audit

ADVISORY SERVICES 5 ü Company Secreterial Advisory ü Strategic Planning Advisory including Business planning of operations in India ü Financial Advisory ü Corporate Advisory ü HR Advisory ü Marketing Advisory

M&A 6 ü Support in transactions like mergers, acquisitions, leveraged buyouts, joint ventures, divestitures or spin-offs. ü Enterprise Valuation ü M&A analysis ü Debt Management ü M&A prospection ü Expertise Buy side - Sell side ü Funds syndication ü Due diligence ü Risk mitigation

OUR SERVICES We assist our clients by offering a 360 degree platform to enter the Indian Market from initial planning to post-entry services Pre. Market Entry Assistanc e 20 Assistanc e in Entry Execution Post. Market Entry Assistanc e

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