Stating that he is “chastened” by the massive jump in foreign investments by India Inc, Reserve Bank deputy governor H R Khan today chided corporations for not doing enough research before taking their decisions, as many had to exit such investments in distress.
“You’ve gone without proper research, due-diligence and adequate planning. So you now see a large-scale disinvestments of such assets happening,” Khan told the gathering of chief financial officers of leading corporations at a CII-held meeting here.
Reeling out data pointing to a rise in outward FDI (foreign direct investment) in the last four years, Khan said he was a “champion” of the phenomenon, but is now “slightly chastened” by the experience.
Khan said the outward FDI has jumped manifold from USD 21 billion in FY10 to USD 52 billion in FY14.
He said corporates went out of the country at the wrong time and have also struggled with the funding aspect, which has complicated the whole situation.
“Because you’ve gone out at wrong time, when the global demand was small you’ve gone to expand, then you were not hedged and you thought that you would get funds but you’re not able to get funds because the banks overseas were not lending, domestic banks were not lending because you were already over leveraged and your product pick up was not there,” he said.
“People only see the inward FDI, they don’t see the outward FDI,” he said, acknowledging that the Tata group is the biggest employer in British manufacturing side today, having invested in assets like Corus and JLR.