presentation icsi 26.4.08

7/31/2019 Presentation Icsi 26.4.08

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Prepared by:

Mythili Dinesh Leena FalnikarManoj Vartak Sameer ChavanDipti Joshi Vinay TerseManjeeta Chowdhary Swapna Jaeel

Manan Udani

AT 79TH SMTP

SETTING UP BUSINESS IN INDIA -

VARIOUS COMPLIANCES INVOLVED


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INDIAN ECONOMY AN OPPORTUNITY UNLIMITED

One of the largest economies in the world.

Strategically located.

Rapidly growing consumer market for branded consumer goods.(estimated to be growing at 8% per annum).

Skilled human resource and professional managers.

One of the largest manufacturing sectors in the world, spanningalmost all areas of manufacturing activities.

One of the largest pools of scientists, engineers, technicians and

managers in the world.


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A sophisticated and modern legal and accounting system.

Language is no barrier.

Rupee is easily convertible on Current Account at marketdetermined rate.

Free and full repatriation of capital, technical fee, royalty anddividends is available in the country.

Foreign brand names have arrived in the country and are freelyused.

Exemption from various duties and taxes in case of 100 per centExport Oriented units and units in Export Processing Zones.


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4

India: Fastest Growing Free Market Democracy

GDP Growth Forex FII Flow FDI Per Capita Inflation

1990 4.9 percent < USD 1 billion USD 1 million(1993)

USD 97 million USD 390 9 percent

2008* 8.7 percent USD 309 billion ason Mar 28, 2008

USD 16.1 billionin 2007-08

USD 12.7 billionin 2007-08 tillDecember (USD16 billion in 2006-07)

USD 740 7.4 percent ason March 29,2008

Source:Times of India, RBI, DIPP, Indian Budget, Rediff* Annualized data used to show comparison with 1990
http://epaper.timesofindia.com/Daily/skins/TOI/navigator.asp?Daily=CAP&login=defaulthttp://rbidocs.rbi.org.in/rdocs/Wss/DOCs/83782.xlshttp://www.dipp.nic.in/fdi_statistics/india_fdi_Dec2007.pdfhttp://indiabudget.nic.in/es2007-08/chapt2008/chap12.pdfhttp://www.rediff.com/money/2008/apr/11magic.htmhttp://www.rediff.com/money/2008/apr/11magic.htmhttp://indiabudget.nic.in/es2007-08/chapt2008/chap12.pdfhttp://www.dipp.nic.in/fdi_statistics/india_fdi_Dec2007.pdfhttp://rbidocs.rbi.org.in/rdocs/Wss/DOCs/83782.xlshttp://epaper.timesofindia.com/Daily/skins/TOI/navigator.asp?Daily=CAP&login=default


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5

India's GDP at Current Prices: 2002-07

469 556638

737830

1006

0

200

400

600

800

1000

1200

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(AE)

USDB

illion

105 105 135 145176

103 125204 231

270

561

191237

398453

0

200

400

600

800

1,000

1,200

19 99-0 0 2 00 2-0 3 2 00 5-0 6 2 00 6-07 2007-08

USDB

illion

Agriculture Industry Services

India: Among the Top-15 Countries in terms of GDP atconstant prices

The Indian economy has witnessed unprecedented growth. Booming services and industry sectors are providing the

required impetus to economic growth

Contribution of

Services -increased from

48 percent to

55 percent

Growth in sectors at Current Prices (2007-08):

Industry: 10.7%Services: 8.9%

Agriculture: 2.6%

Source:MOSPI Statistics

AE - Advance Estimates

Fastest GDP growth of 9.4 percent in 2006-07, since

last 18 years (at constant prices)

Indias GDP has witnessed high growth, and was the

second fastest growing GDP after China in 2006-07

The sound performance of each industry segment is

leading to the overall robust performance of the Indian

economy
http://mospi.nic.in/t1_30_11_07.htmhttp://mospi.nic.in/t1_30_11_07.htmhttp://mospi.nic.in/t1_30_11_07.htmhttp://mospi.nic.in/t1_30_11_07.htm


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INTERNATIONAL INVESTORS HAVE REPOSED FAITH

IN INDIA..

0 0.5 1 1.5 2 2.5

Japan

Italy

HK

A us

France

Ger

UK

India

USA

China

Growth opportunities in India have attracted global investors including venture

capital funds and private equity investors.

Source: A T Kearney


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FINANCIALSERVICES 5%

PHARMA 6%

IT & ITES - 8%

OIL AND GAS 12%

CHEMICALS - 16%

AUTOMOTIVE - 44%

CROSSBORDER46%

DOMESTIC54%

TREND INDICATIVE OF INDIAOPENING HER DOORS TO

GLOBALISATION

M & As AND PRIVATE EQUITY DEALS


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8

Major M&A Deals Undertaken Abroad by India Inc.

USD 12.1 billionTata Steel buys Corus Plc

USD 6 billionHindalco acquired Novelis Inc.

USD 2.3 billionTata buys Jaguar and Land Rover

USD 1.6 billionSuzlon Energy Ltd. acquires REpower

USD 1.58 billionEssar Steel acquired Algoma Steel


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9

BRIC Report,

Goldman Sachs

I have never seen

India so dynamic,

vibrant and full ofbusiness

opportunities.

- Dan Scheinman, Cisco

System Inc. as told to

Business Week, August

2005

We came to India for the

costs, stayed for the

quality and are now

investing for innovation.

John Redwood

Economic

Competitiveness Policy

Group, UK

India is now truly a

land of opportunity.

Jack WelchGeneral Electric

India is a

developed country

as far as intellectual

capital is

concerned.

Peter Loescher

President and

Chief Executive

Siemens

By 2032, India will be

among the three

largest economies in

the world.

Why India? Quote Unquote

Travyn

Rhall,ACNielsen

The Indian market has two

core advantages - an

increasing presence of

multinationals and an upswing

in the IT exports.

Craig Barrett

Intel

Corporation

India has evolved into

one of the world's

leading technology

centers.

Mr Paul de Voijs

Managing DirectorVolvo Car India

India is a very exciting

market and the luxury

car segment is growing

exponentially here.


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BUSINESS SECTORS

IN INDIA


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Diverse Industrial Sector.

Boost in Industrial growth since the commencement of Economicreforms of 1991

One of the largest manufacturing sectors in the world, spanningalmost all areas of manufacturing activities

Government has taken strong measures for Industrial Growth:

GLOBALISATION

PRIVATISATION

LIBERALISATION

Sectors Are Broadly Classified As:

INDUSTRIAL SECTOR

INFRASTRUCTURE SECTOR

SERVICE SECTOR


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INDUSTRIAL SECTORS

Auto Industry

Biotechnology

Cement

Drugs and Pharmaceuticals

Fertilizers

Food Processing

Gems and Jewellery Heavy Industry

Mines

Real Estate

Steel

Textiles Oil and Gas


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INFRASTRUCTURE SECTORS

Civil Aviation

Ports

Roads and Highways

Special Economic Zones

Health

Power

Telecommunications


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SERVICE SECTORS

Financial Sector

Business Process Outsourcing (BPOs)

Knowledge Process Outsourcing (KPOs)

Retailing

Tourism

Information Technology

Media and Entertainment


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SECTORWISE GROWTH

Type Of Industry Growth RateDuring Ninth Five Year

Plan(%)

Growth RateDuring Tenth Five Year

Plan(%)

Increase In Growth

Rate(%)

Transport & Communication 8.9% 15.3% 6.4%

Construction 7.1% 12.9% 5.8%

Manufacturing 3.3% 8.6% 5.3%

Mining 4% 6.1% 2.1%

Financing, Real Estate &

Housing

8.0% 9.5% 1.5%

Trade And Hotels 7.5% 8.5% 1%

Electricity 4.8% 5.6% 0.8%

Agriculture And Allied 2.5% 2.5% -


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FUNDING


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Equity shares

Preference shares

Debentures

Borrowings- Indian Banks, Foreign Banks and Financial Institutions

External Commercial Borrowings

Venture Capital


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EQUITY SHARES

Needs no servicing as the Company is not required to

pay to its equity share holders any fixed amount of

return in the form of interest.

Dividend is declared by the Company when the profits

of the company permit.


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PREFERENCE SHARES

No voting rights to preference shareholders

Option of Convertibility into Equity shares

Fixed rate of Dividend to the shareholders


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DEBENTURES

Less costly source of funds

If the investor chooses the option of conversion intoequity, no interest or principle amount to be paid.

Rate of interest lower than the market rates.


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BORROWINGS FROM DOMESTIC / FOREIGN BANKSAND FINANCIAL INSTITUTIONS IN INDIA

Period of funds is definite which is fixed at the time of

taking such loans.

Continued availability of funds for the pre-determined

period.

Interest burden for the pre-determined period.


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EXTERNAL COMMERCIAL BORROWINGS

Emerging source of finance

Indian corporates can use for expansion of existing

capacity as well as for fresh investments


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VENTURE CAPITAL FUNDS

Important source of finance for small and medium-sized

firms, which have very few avenues for raising funds

Gives scope for establishing business to young and

dynamic people with entrepreneurial talent and business

skills


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TYPES OF BUSINESS

ORGANISATION


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TYPES

Non Corporate Organisation

Sole ProprietorshipPartnership

Joint Hindu Family business

Corporate Organisation

Cooperative societiesJoint Stock Companies


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SOLE PROPRIETORSHIP

Features Merits Limitations

Single Ownership Ease of Formation Limited Capital

No Separate Entity Flexibility Uncertain Life

Capital Quick Decision-making Unlimited Liability

Formation Secrecy Limited Managerial Ability

Risk Bearing Direct Incentive Unsound Business

Decisions

Unlimited Liability Sense of Accomplishment

Management and Control Personal Touch

Continuity Low Overhead Costs

Minimum Government

Regulations

Social Importance


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PARTNERSHIP


Two or More Members Ease of Formation Limited Resources

Agreement Large Financial Resources Unlimited Liability

Lawful Business Better Management Possibility of ConflictsRisk-bearing and- Sharing of

Profits

Better Decision-making Delay in Decision-making

Agency Relationship Sharing of Risk Risk of Implied Agency

Unlimited Liability Secrecy Disruption in Continuity

Restriction on Transfer ofShare

Flexibility Less Public Confidence

Shared Decision-making and

Control

Impact of Unlimited Liability Non-transferability of interest

Continuity Easy Closure

Registration


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HINDU UNDIVIDED FAMILY


Application of Hindu Law Auto formation limited stability

Unlimited Liability Limited capital

Membership Economy Limited managerial ability

Management and control Decision making No link even responsibility

and reward

Unaffected by death Efficient management of the

business

Registration not compulsory Cordial relations


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JOINT STOCK COMPANY


Artificial Person Vast Financial Resources Difficulties in formation

Separate Legal Identity Limited Liability Excessive government control

Formation Perpetual Existence Management in the hands of a

few shareholders

Perpetual Existence Transferability of Shares Fraudulent practices by

promotes / directors

Limited Liability Professional Management Slow decision making

Transferability of Shares Scope for Expansion Neglect of minority shareholders

Control and Management Diffused Risk Lack of personal touch

Separate Property Public Confidence Difficulties in winding up

Common Seal

Risk-bearing


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COOPERATIVE SOCIETIES


Voluntary Association Ease of Formation Limited Capital

Open Membership Equality in Voting Rights Inefficiency in Management

Separate Legal Entity Democratic Functioning Excessive GovernmentRegulations

Limited Liability Limited Liability Lack of Secrecy

Service Motive Continued Existence Lack of Motivation

Management and Control Government Assistance Differences of Opinions or

Conflicts

Disposal of Surplus Economical Operations Misuse of Funds

Steady Supply of Goods and

Services

Fair Dealings

Equitable Distribution of Surplus


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GOVERNMENT POLICIES


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OBJECTIVES

Economic Development & Growth

Social Development

Advancement of Science & Technology

Competitive Market

Industrial Growth Equal Distribution

National Interest

Greater Transparency

Protection of Stakeholders Timely Disclosures

Management, Control and Administration

Principal of Natural Justice

Dispute Resolution


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LPG

Liberalisation Privatisation Globalisation


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LIBERALISATION

Industrial Policy : Reduction in the area exclusively reserved for the public sector

Disinvestment in the equity in selected public sector undertaking of the

Location Policy

Concessional Finance

Foreign Investment:

New Ventures

Existing Companies

Wholly Owned Subsidiary

Foreign Technology Agreements :

Subject to the Condition Specified the RBI, through its regional office

accord the approval to all the industries for Foreign Collaboration

Agreement.


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PRIVATISATION

Reduction in the areas exclusively reserved for the public sector

Disinvestment of equity in selected public sector undertaking

GLOBALISATION

Double Taxation Treaty

Indias Regional & Preferential Trading Arrangements

E-Commerce

100 per cent foreign equity in foreign branded, specialized retail

chains 100 per cent FDI in Greenfield Private Rural-Agricultural Banks

Convertibility of Indian Rupee


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INFRASTRUCTURE

General Measures :

Uniform Tax holidays

Foreign Direct Investment

Import duty structure for the project imports rationalised

POWER National Electricity Policy (NEP), 2005Targets a rise in per capita availability from 631 units to 1,000 units per annum by

the end of 2012

procurement of power by distribution licensees through competitive bidding

Power Vision 2010

ROADS Department of Road Transport and Highways has laid down comprehensive policyguidelines for private sector participation in the highway sector

projects in NHDP Phase-III to Phase-VII would be taken up on the basis of Public-

Private Partnership (PPP) on Build Operate and Transfer (BOT) mode

CIVILAVIATION

Ministry of Civil Aviation has given in-principle approval for import of 496 aircrafts

and, in the next five years

It has been decided to set up an Airport Economic Regulatory Authority to fix, review

and approve tariff structure for the aeronautical services

PORTS Private operators can enter into a service contract, a management contract, aconcession agreement

Cargo handling berths and dry docks, container terminals and warehousing facilities

and ship-repair facilities has open to Pvt. Sector on a BOT basis


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AMENDMENT AND INTRODUCTION OF ACTS

MRTP Act, Competition Bill 2007

Intellectual Property Laws

Value Added Tax (VAT)

The Micro, Small And Medium Enterprises Development Act, 2006,

Transparency In Decision Making

Planning To Introduce Goods & Services Tax


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TAXATION


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Section To whom Conditions Incentive

10A Newly establishedundertakings in the

free trade zone.

Not formed bysplitting up or

reconstruction.

Not formed bytransfer ofMachinerypreviously used for

any purpose.

Report from CAfurnished deduction

has been correctly

claimed.

No deduction will beallowed u/s 80-IA or80-IB in respect ofthat undertaking

which claimed

exemption under this

section.

Adeduction ofProfits and Gains

derived by an

undertaking from the

export of article isallowed from total

income.

Available forTenconsecutive

assessment years.

No exemption is

allowed from AY-2010-11.

First 5AY-100% ofProfits from export

business.


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Next 2 AY 50%profit from export

business.

Next 3 AY Lowerof50% profit fromexport business

OrAmt transfer to

SEZ ReinvestmentA/C.

10B Newly establishedHundred percentexport oriented

undertaking

Manufacture of

article only for thepurpose ofexports.

A deduction of

Profits and Gainsderived by a 100%

export-oriented

undertaking fromthe export ofarticle is allowedfrom total income.


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80-IA Deductions in respect of profitand gains from industrial

undertakings or enterpriseengaged infrastructuraldevelopment, etc.

Not formed by splittingup or reconstruction.

Not formed by transferof Machinery previouslyused for any purpose.

100% Profit andGains for any 10

consecutive AY.

80-IB Deductions in respect of profitsand gains from industrial

undertakings other thaninfrastructure undertakings.

Not formed by splittingup or reconstruction.

Not formed by transferof Machinery previouslyused for any purpose.

10 or more workers in

manufacturing process

with aid of power.

100% for 5 AY and25% for next AY.


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20 or more workers

in manufacturing

process withoutaid of power.

80-1C Deduction in respect ofprofits and gains from

certain undertakings or

enterprise in certain specialcategory States.

Engaged in

specified businessas stated under this

section.

Not form by splittingup or reconstruction.

Not formed by

transfer ofMachinerypreviously used forany purpose.

100% for ten AY

upto AY 2011-12.


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COMPLIANCES


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Various compliances under The Companies Act, 1956

Various compliances for listed Companies as per SEBI,

guidelines in Listing Agreement

Intellectual property rights

(Trade Mark, Copy Rights, Patents)

Foreign Exchange and Management Act,1999


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OTHER COMPLIANCES


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INDUSTRIAL UNDERTAKINGS

Industrial Undertakings exempt from licensing have to file six copies in Part

A of Industrial Entrepreneurs Memorandum (IEM) with the SIA, Dept. ofIndustrial Policy and Promotion, Ministry of Industry before startingcommercial production along with a fee of Rs. 1000/-

For obtaining Industrial licence, form FC-IL to be filed with the SIA, Dept. ofIndustrial Policy and Promotion, Ministry of Industry before startingcommercial production along with a fee of Rs. 2500/-. FC to be filed in PartA and IL in Part B.

For STP Registration, application to be made to Director, STPK beforestarting commercial production along with a fee of Rs. 2500/-. The followingdocuments to be attached:

Board resolution authorising the registration

Trade LicenceMemorandum and Articles

Brief Project Report

Letter of allotment of PAN

Document of allotment of Importer Exporter code

List of capital goods to be imported


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MICRO, SMALL AND MEDIUM ENTERPRISE

File Entrepreneurs Memorandum (EM) with DIC before starting

commercial production. EM to be filed in two parts : Part I to be filed

as expression of interest and Part II after commencement of

production with such applicable fee.

Following documents to be attached:

Memorandum & Articles of Association.Power of attorney / Board resolution authorising the signing of EM.


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NO OBJECTION CERTIFICATE FROM STATEPOLLUTION CONTROL BOARD

Consent form to be filed with the respective State Pollution Control

Board before commencing work at site with such applicable fee.

Following documents to be attached:

Site / location map

No objections & site clearance certificate from local board andexempted based on the degree of pollution

Project Report

Flow chart for detail of process

Affidavit for investment in fixed assets

Copies of land deed / allotment letter / lease document / rent receipt

etc.

Technical report for pollution control measures

Challan for deposit of consent fees.


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IMPORTER EXPORTER CODE (IEC)

Apply to Regional Office, DGFT, Reserve Bank of India for IEC

before importing or exporting with such applicable fee.

Following documents to be attached

Banker certificate

PAN letter

2 passport size photographs

Self addressed envelope duly stamped


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THANK YOU

presentation icsi 26.4.08

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