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Investment by Indian firms goes up in UK

Latest government figures show that Indian firms were behind 36 inward investment projects in the UK during 2004-05.

india Updated: Jan 09, 2006 19:58 IST

More and more Indian companies are now investing in the UK. Latest government figures show Indian firms were behind 36 inward investment projects in the UK during the years 2004-05, increasing from 28 in 2003-04 and 19 in 2002-03.

It puts India in eighth position among countries announcing investment deals in the UK, at level with China and ahead of Italy and Netherlands.

Indian investments led to 1,418 new jobs in 2004-05, in sixth position behind the US, Germany, Japan, Ireland and France.

The latest company to come to Britain was Mahindra & Mahindra, one of India's biggest industrial conglomerates, when it announced investment projects in the UK, through the acquisition of Stokes, an engineering business based near Birmingham, last week.

Earlier India's Tata group announced setting up a development centre in the Midlands, which would employ up to 1,000 to capitalise on new ideas in vehicle technology.

India's measures to liberalise the economy since the early 1990s have made an "enormous" difference to the ability of Indian firms to set up operations abroad, says William Pedder, chief executive of inward investment at UK Trade & Investment, a government agency.

According to The Financial Times, Ajay Khaitan, an India-born manager who is head of Avatar, a London-based private equity company, thinks the trend will continue over the next few years.

"A lot of Indian businesses are particularly suited to operating globally," he says. "In five years I expect to see 50 per cent more Indian multinationals than Chinese ones."

The newspaper quotes Baba Kalyani, chairman of India-based Bharat Forge, one of the world's biggest makers of specialist forged parts for vehicles, saying, his company would be wrong to base its strategy on simply capitalising on low-cost labour in India.

"We need to get access to western markets and western technologies," says Kalyani. Last September Bharat bought Ayr-based Scottish Stampings as part of an acquisition of the Swedish engineering business Imatra, and which came on the back of other acquisitions in the US, UK and Germany.

Hemant Luthra, head of Mahindra's systems and automotive technology division, says Stokes will act as a "front end" of Mahindra in Europe to link with automotive customers throughout Europe. The work on making parts would be shared out between high-cost centres in the UK and low-cost factories in India.

Adi Godrej, chairman of Mumbai-based Godrej, says Indian companies' interest in global expansion has followed from a "boost in confidence" helped by rapid economic growth at home.

"Indian industry has caught up a lot (on western management practice) in the past 10 years. I feel that within three to five years Indian industry will be net exporters of capital as interest in overseas growth strengthens," he says. The company acquired London-based toiletry manufacturer and distributor Keyline Brands for an estimated £20m a few months ago. That was Godrej's first purchase in Europe in consumer products.

Brian Boyce, Keyline's managing director, says Keyline could expand its operations by selling in Europe toiletry formulations that evolved from Godrej's Indian activities, such as special types of hair colouring agents where Godrej has a technical lead, and by introducing some of its products in India.

The Indian pharmaceutical sector has also made significant investments in the UK. Nestor, Nicholas Piramel and Wockhardt are among several Indian medicines businesses to have bought companies in the UK, partly to beef up their own research and development capabilities, reports the FT.

First Published: Jan 09, 2006 19:58 IST