Wind Energy Equipment in India: A Strategic Reference, 2006

How to Strategically Evaluate India

Perhaps the most efficient way of evaluating India is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to wind energy equipment are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries

Demand/Market Potential Driven Firm

Relative Accessibility

Accessibility/Supply Averse Firm

In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

Latent Demand and Accessibility in India

This report provides a detailed overview of factors driving latent demand and accessibility for wind energy equipment in India. Latent demand is largely driven by economic fundamentals specific to wind energy equipment. This topic is discussed in Chapter 2 using work carried out in India on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for wind energy equipment in India. I use the term “micro” since the discussion is focused specifically on wind energy equipment.

Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in India. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in India. The numbers are only indicative of an average firm whose primary activity is in India. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in India. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “steam, gas and hydraulic turbines and turbine generator set units”, as defined in Chapter 3. Again, while “steam, gas and hydraulic turbines and turbine generator set units” does not exactly equate to “wind energy equipment”, it nevertheless gives an indicator of how India compares to other countries for a proxy adjacent category along various dimensions.

Chapter 4 deals with macro-accessibility and covers factors that go beyond wind energy equipment. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in India:
Openness to Trade in India
Openness to Direct Investment in India
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in India. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering India. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier. SHOW LESS READ MORE >

1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate India 1
1.3 Latent Demand and Accessibility in India 3
2 WIND ENERGY EQUIPMENT IN INDIA 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 5
2.3 Market Trends 5
2.4 Accessibility: Trade Barriers 6
2.5 Accessibility: The Structure of Competition 6
2.6 End Users 6
2.7 Market Access 6
2.8 Market Issues and Obstacles 7
2.8.1 Safety Standards and Labeling 7
2.9 Accessibility: Market Entry 7
2.10 Key Contact 8
3 FINANCIAL INDICATORS: STEAM, GAS AND HYDRAULIC TURBINES AND TURBINE GENERATOR SET UNITS 9
3.1 Overview 9
3.1.1 Financial Returns and Gaps in India 10
3.1.2 Labor Productivity Gaps in India 13
3.1.3 Limitations and Extensions 13
3.2 Financial Returns in India: Asset Structure Ratios 14
3.2.1 Overview 14
3.2.2 Assets - Definitions of Terms 14
3.2.3 Asset Structure: Outlook 17
3.2.4 Large Variances: Assets 18
3.2.5 Key Percentiles and Rankings 21
3.3 Financial Returns in India: Liability Structure Ratios 36
3.3.1 Overview 36
3.3.2 Liabilities and Equity - Definitions of Terms 36
3.3.3 Liability Structure: Outlook 38
3.3.4 Large Variances: Liabilities 39
3.3.5 Key Percentiles and Rankings 42
3.4 Financial Returns in India: Income Structure Ratios 53
3.4.1 Overview 53
3.4.2 Income Statements - Definitions of Terms 53
3.4.3 Income Structure: Outlook 55
3.4.4 Large Variances: Income 56
3.4.5 Key Percentiles and Rankings 59
3.5 Financial Returns in India: Profitability Ratios 72
3.5.1 Overview 72
3.5.2 Ratios - Definitions of Terms 72
3.5.3 Ratio Structure: Outlook 74
3.5.4 Large Variances: Ratios 75
3.5.5 Key Percentiles and Rankings 78
3.6 Productivity in India: Asset-Labor Ratios 93
3.6.1 Overview 93
3.6.2 Asset to Labor: Outlook 94
3.6.3 Asset to Labor: International Gaps 95
3.6.4 Key Percentiles and Rankings 98
3.7 Productivity in India: Liability-Labor Ratios 113
3.7.1 Overview 113
3.7.2 Liability to Labor: Outlook 114
3.7.3 Liability and Equity to Labor: International Gaps 115
3.7.4 Key Percentiles and Rankings 118
3.8 Productivity in India: Income-Labor Ratios 129
3.8.1 Overview 129
3.8.2 Income to Labor: Outlook 130
3.8.3 Income to Labor: Gaps 131
3.8.4 Key Percentiles and Rankings 134
4 MACRO-ACCESSIBILITY IN INDIA 147
4.1 Executive Summary 147
4.2 Dynamic Markets 148
4.2.1 Agriculture 148
4.2.2 Industry 148
4.2.3 Services 149
4.2.4 Insurance 149
4.2.5 Healthcare 149
4.2.6 Pharmaceuticals 149
4.2.7 Broadcasting 150
4.2.8 Software Services 150
4.3 Economic Fundamentals and Dynamics 150
4.3.1 Government Intervention Risks 150
4.3.2 Infrastructure Development 151
4.3.3 Regional Economic Integration 153
4.4 Political Risks 153
4.4.1 Economic Relationship with the United States 153
4.4.2 Political Risks 153
4.4.3 The Political System 154
4.5 Marketing Strategies 154
4.5.1 Distribution Channel Options 154
4.5.2 Agents and Distributors 156
4.5.3 Franchising Activities 157
4.5.4 Direct Marketing Options 159
4.5.5 Joint Ventures and Licensing Options 160
4.5.6 Technology Transfers 164
4.5.7 Creating a Sales Office 164
4.5.8 Selling Strategies 167
4.5.9 Advertising and Trade Promotion 168
4.5.10 Major Indian Business Associations and Organizations 171
4.5.11 Pricing Issues 171
4.5.12 Government Procurement 173
4.5.13 Hiring Local Counsel 174
4.5.14 Performing Due Diligence and Checking Bona Fides 175
4.6 Import and Export Regulation Risks 178
4.6.1 Tariff and Non-Tariff Barriers 178
4.6.2 Tariff Schedule 178
4.6.3 U.S.-Imposed Export Controls 180
4.6.4 Licenses Required for Imports 181
4.6.5 Customs Regulations and Contact Information 183
4.6.6 Entering Temporary Imports 185
4.6.7 Special Import/Export Requirements and Certifications 185
4.6.8 Labeling Issues 185
4.6.9 Warranty and Non-Warranty Repairs 186
4.6.10 Free Trade Zone 186
4.6.11 Adherence to Free Trade Agreements 188
4.7 Investment Climate 188
4.7.1 Openness to Foreign Investment 188
4.7.2 Sector-Specific Guidelines for Foreign Direct Investment (FDI) 189
4.7.3 Conversion and Transfer Policies 193
4.7.4 Expropriation and Compensation 193
4.7.5 Dispute Settlement 193
4.7.6 Performance Requirements and Incentives 194
4.7.7 Right to Private Ownership and Establishment 194
4.7.8 Intellectual Property Risks 195
4.7.9 Transparency of the Regulatory System 195
4.7.10 Capital Market Risks 195
4.7.11 Corruption 196
4.7.12 Bilateral Investment Agreements 197
4.7.13 OPIC and Other Investment Insurance 197
4.7.14 Labor 197
4.7.15 Free Trade Zone Options 198
4.8 Trade and Project Financing 198
4.8.1 The Banking System 198
4.8.2 Foreign Exchange Control Risks 200
4.8.3 Financing Export Strategies 201
4.8.4 Availability of GSM Credit Guarantees 202
4.8.5 The Export-Import Bank of the United States (Ex-Im Bank) 203
4.8.6 The Overseas Private Investment Corporation (OPIC) 205
4.8.7 Trade and Development Agency 206
4.8.8 Asian Development Bank 207
4.8.9 The World Bank 208
4.8.10 International Finance Corporation (IFC) 209
4.8.11 The Multilateral Investment Guarantee Agency (MIGA) 209
4.8.12 U.S. Banks 209
4.8.13 Regional MBD/IFI Offices 210
4.9 Travel Issues 211
4.9.1 Local Business Practices 211
4.9.2 Travel Advisories 213
4.9.3 Areas of Instability 214
4.9.4 Crime Information 216
4.9.5 Health 216
4.9.6 Travel Conditions 217
4.9.7 Legal Issues 217
4.9.8 Infrastructure for Conducting Business 218
4.9.9 Country Data 220
4.10 Key Contacts 222
4.10.1 Important Web Sites of U.S. Organizations 223
4.10.2 U.S. Embassy Contacts 224
4.10.3 Chambers of Commerce 226
4.10.4 Trade Associations 228
4.10.5 Government Agencies 230
4.10.6 Multilateral Development Bank Offices in India 236
4.10.7 Other Useful Contacts 236
4.10.8 Market Research Firms 238
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 241
5.1 Disclaimers & Safe Harbor 241
5.2 Icon Group International, Inc. User Agreement Provisions 242