Around 80 Indian companies in Germany generated combined revenues of 11.4 billion euro (around Rs 87,506 crore) and employed a total workforce of 27,400 in 2016, according to a study.
Around 80 Indian companies in Germany generated combined revenues of 11.4 billion euro (around Rs 87,506 crore) and employed a total workforce of 27,400 in 2016, according to a study. The CII–EY–Bertelsman Foundation Study, based on interviews with leading Indian CEOs, revealed that Indian companies in Germany currently generate nearly 70 per cent of their turnover in the labour-intensive sectors of metals (40 per cent) and automotives (29 per cent). “Important players in these sectors are Tata Steel, Hindalco industries and Sona Autocomp. The Indian IT industry accounts for a revenue share of nine per cent,” said CII citing the study’s findings. The study pointed out that 83 per cent German Mittelstand (small and medium-sized) companies do not have a succession plan in place at present. As of 2015, more than 40 per cent of company owners in this economic strata were aged 55 or older. Overall, 9 per cent companies envisioned succession taking place within the controlling family, whereas 8 per cent or around 2,90,000 owners expected external succession by 2018. The study highlighted that this represents huge potential for Indian investors.
According to the study, since 2010, nearly 140 major investment projects by Indian companies have been initiated in Germany. This includes FDI announcements as well as M&A. Between 2010 and 2016, Germany was the second-largest recipient of Indian FDI in Europe with 96 projects. The top sectors for investment in the European nation include Automotive industry, Metal and Metal processing industry, professional, technical and scientific services, Chemical and Pharmaceutical industry, Electrotechnics and Manufacture of machinery.
This trend, however, is witnessing a slow shift. Access to high-tech products and the brand “Made in Germany” are also important factors which influence Indian Industry’s decision to invest in German companies, the study said. As many as 80 per cent of the CEOs surveyed for the report said access to innovation and technology are important factors that influence the decision to invest in Germany. “This is borne out by the M&A activity over the past six years,” said Chandrajit Banerjee, Director General, CII.
In fact, one-fifth of the acquisitions made by Indians were found to be in the automotive supplier sector and one- third in the mechanical engineering sector. “Examples include Motherson Sumi and Bharat Forge. Moreover, the planned merger of the steel businesses of Tata Group and ThyssenKrupp has taken Indo-German cooperation to a whole new level,” said CII.
German companies can benefit from this development through accelerated integration with the huge Indian market, access to the innovative potential of Indian companies as well as to the large pool of Indian professionals, the study said. “How Indian investment develops in Germany in the future will depend on a number of factors such as Brexit and regional marketing in Germany. As on date, 46 per cent of all Indian investment projects in Europe are made in the UK. Germany comes in second with 17 per cent of these projects,” said the report.
Brexit, however, could reduce this gap, said Hermann Mühleck, India expert at EY. Ninty per cent of surveyed Indian CEOs were of the opinion that the Brexit will increase the attractiveness of Germany as an investment location and therefore will be favourable for volume and diversity of Indian investments in this country.