India pets the Dragon: Yearns for the Yuan

 

Last week, China's Shangha Fosun Pharmaceutical  has agreed to acquire 96% stake in Hyderabad-based Gland pharma, according to The Economic Times the deal includes  shares held by founders Ravi Penmetsa and family and private equity giant KKR.

 

The transaction will be the first billion-dollar takeover of an Indian company by a Chinese one. As this will be a controlling acquisition by a Chinese player, the deal will undergo regulatory scrutiny.

 

Shanghai Fosun Pharmaceutical is a part of the Fosun International group, the flagship company of billionaire Guo Guangchang, one of China's most popular entrepreneurs.

 

Gland is a contract manufacturer of injectables, supplying to companies in India and the US such as Dr Reddy's and Mylan.

 

The timing of this acquisition is very interesting. It comes at a time when there is intense diplomatic and defence stand-off between the Dragon and the Tiger. It’s not just the one acquisition here. Chinese investments in total India have grown six-fold in 2015 to $870 million from the previous year.

 

Last month China scuttled India’s longstanding wish to enter the Nuclear Suppliers Group (NSG), the exclusive cabal that controls global nuclear commerce. Earlier this week, the Uttarakhand government raised an alarm saying that Chinese troops were “active” in the Bara Hoti area of Chamoli district. Chief Minister Harish Rawat confirmed that the People’s Liberation Army (PLA) had transgressed into Indian territory.

 

​Chinese troops routinely breach the Arunachal border, although the last time they did that, they claimed that the Sino-India border has not yet been demarcated and the soldiers of the PLA were conducting “normal patrols” on the Chinese side of the line of actual control.

 

Then, India decided to expel three Chinese journalists, which evoked a strong response in China. In March this year, there was another face-off between the PLA and Indian soldiers in Burtse and Depsang in northern Ladakh. The two countries have so far held 19 rounds of boundary talks by Special Representatives.

 

Regardless, China has jumped 10 spots in terms of foreign direct investment (FDI) in India during the first two years of the NDA regime. It has pumped $956 million in sectors including automobiles, metallurgical industry, electrical equipment and power.

 

As of now China is ranked 18th on the list, but it is close to entering the top ten if just the last two years are considered. Since 2014, it has outpaced Hong Kong, Italy, Caymen Islands and South Korea, all of which rank higher in cumulative investments made between April 2000 and March 2016.

  
Companies including Shanghai Automotive Industry Corporation, Chint Group, Sopo Group, Dingshen and Shanghai Electric Company have all proposed big-ticket investments in India.
  

A Chinese real estate firm run by one of its richest men, Dalian Wanda Group, has proposed setting up industrial parks in India with an investment of $10 billion. The Beiqi Foton car company, Shanghai Baoshan Steel company and the Taiyuan Heavy Industry company have also lined up significant investments in India.

 

In February this year, construction machinery manufacturer Sany Heavy Industry said it plans to invest $1 billion in India in the next decade.

 

Jack Ma's Alibaba, the largest online retailer in the world is also looking to buy, or invest in an Indian logistics company specialising in deliveries for online retail players, and towards this end has held talks with Delhivery and Xpressbees Logistics, said a report.
 

In fact, China is also being aggressively wooed by the NDA government to be a part of its Make in India campaign. Just last week, finance minister Arun Jaitley rolled out the red carpet for Chinese investors and gave a strong pitch to garner investments in infrastructure and energy at a business summit.
 

“And for a large number of Chinese investors .....there is a massive infrastructure programme which is on in India,” he said.
 

"The kind of returns they offer are also very large. Chinese investors can look at each individual project or they can even look at the national infrastructure investment fund," Jaitley added.
 
During the Chinese President Xi Jinping's visit to India earlier, China has committed $20 billion investments in India. India, on its part, has been pulling out all stops to accentuate the investment climate for Chinese investors by removing visa and security restrictions.

 

It is in fact extremely keen on more investments from China as the bilateral trade deficit has touched over $48 billion in favour of China in about $ 71 billion trade last year.

 

One of China biggest banks, the Industrial Commercial Bank of China (ICBC), had set up a special team in its Mumbai branch last year to provide its Chinese clients with consultation services for mergers and acquisitions (M&As) in India.

 

Clearly, India desperately wants the Dragon's yuan. The ferocious diplomatic and defence mauling of each other can continue, but that doesn’t affect what really matters, -- the moolah.   

Images courtesy Guruprasath R