Mylan, Balco/HZL and DMICDC only fast solutions
Now that the commerce and industry ministry has finally come around with some sensible guidelines for FDI in multi-brand retail—after delaying them for more than 7 months—the question is whether there will be a rush of investments into the country. In addition to the changes in the rules for FDI in retail, the Cabinet also cleared raising of FDI caps in other sectors such as telecom. And, as will become clear later in the week, chances are the government has sewn up enough support to get Parliament to approve 49% FDI caps in insurance, up from the current 26%.
The raising of telecom caps, along with the changes being contemplated right now in the base prices of 2G auctions and likely more friendly M&A norms, are likely to fetch more investments in telecom. In the case of retail, given the slow nature of the roll-out of the business—look at the number of cities Bharti’s Easyday stores are in to realise this—chances of big investments coming in quickly are remote. In any case, the policy also stipulates just a minimum of $100 million of investment for each player in the first 3 years.
In which case, if India wants to make a quick impact in terms of attracting FDI and in terms of rekindling investor interest, it has to aggressively go for the low-hanging fruit. One such, also consistently opposed by the industry ministry in the FIPB, is the $1.6 billion Mylan proposal to buy Strides Arcolab’s injectables business—there is no conceivable reason why this should not be cleared as the unit produces for only the exports market anyway. Another $2-3 billion of forex can come in from quickly selling to Anil Agarwal’s Vedanta the residual stakes in Balco/HZL. As far as catalysing local investment is concerned, the DMICDC has fully-funded projects for new cities/commercial centres ready to take off—it is not clear why these are not being pushed more purposively.