2013

Indo-Japan Trade & Investment

Bulletin February Issue

Japan Desk, Corporate Professionals

Indo-Japan Trade & Investment Highlights

India and Japan to Set-Up Information and Communication Technology Working Group

to Boost Bilateral Trade

Suntory Explores Acquisition Route to Tap Indian Liquor Market

Japan Keen to Help India Achieve its Target of Eightfold Expansion in Solar-Power

Output

Nissan Pushes Aggressively to Double Sales in India

Japanese Giant YKK AP Buys Aluminium Extrusions Business of Bhoruka Aluminium

Japan Seeks Relaxation of Banking Norms for Foreign Banks Operating in India

Nissan to Set up a 1,700 Crore Plant on the Outskirts of Chennai

Japan’s All Nippon Airways to be the Next Gateway Carrier

Japanese Financial and Retail Chain 7-Eleven is Considering Entering the Indian White

Label ATM Space

Japanese Auto-Component Makers to Enter India through Set-Up in Tamil Nadu

Japan’s KYB Corporation acquires 50% stake in Conmat System Private Limited

Japanese Manga for India

Knowledge Centre

Corporate Social Responsibility

INDEX

India and Japan to Set-Up Information and Communication Technology Working Group

to Boost Bilateral Trade

India and Japan have agreed to set up working group of Information and Communication

Technology (ICT) in order to provide a boost to the bilateral trade between the two nations.

Indian Telecom and IT Minister Mr. Kapil Sibal put forward the proposal during his visit to

Japan to encourage Japanese investment in ICT Sector in India.

A Joint Working Group between Ministry of Economy Trade and Industry (METI) of Japan and

Department of Electronics and Information Technology (DEITY) of India will be set up. The

Working Group is likely to submit their report in three months time.

India will also be forming a special Japan desk to focus on Industrial and bilateral relations

between the two nations in the areas of ICT and to facilitate the collaboration and coordination

between companies from both the countries.

Suntory Explores Acquisition Route to Tap Indian Liquor Market

Japanese Liquor major, Suntory Liquors Ltd. is said to be in talks with John Distilleries (JDL) to

pick-up stake to enter Indian liquor market. JDL is said to be in the process of raising funds in

order to fund their expansion plans in India and abroad.

Suntory has been exploring its options in India to set-up presence in the lucrative Indian

alcoholic drinks market and may have found its local partner in JDL. Suntory had announced its

India entry by acquisition of controlling stake in Narang Connect to tap the non-alcoholic drinks

market in India last year.

Japan Keen to Help India Achieve its Target of Eightfold Expansion in Solar-Power

Output

Japanese companies are looking at exploiting the opportunities in the clean energy market in

India as Indian Government has offered a range of tax benefits to encourage increased

investment. India has set a target of 9,000 megawatts of grid-connected solar plants by 2017,

which is more than eight times the current capacity.

Indo-Japan Trade & Investment Highlights

Nissan Pushes Aggressively to Double Sales in India

Japanese auto major Nissan has set out an aggressive strategy for India to push its sale volume to

double by next year. Nissan expects to close the current year with sale of 50,000 cars and has a

market share of 1.6%. The company is optimistic about pushing aggressively in the Indian

market to gain a share of 10% by 2017. Nissan’s plant in Tamil Nadu has a capacity of

manufacturing 500,000 units a year that it operates jointly with Renault. With an estimate

production of 300,000 units this year, company exports most of the manufactured units to other

countries.

Japanese Giant YKK AP Buys Aluminium Extrusions Business of Bhoruka Aluminium

YKK AP has bought the unit of Bhoruka Aluminium Ltd. (BAL), India’s second largest

commercial extrusions firm, in a slump sale. This has come in the wake of BAL’s efforts to pay

debts after it became a Non Performing Asset for its lender State Bank of India. YKK Group, a

significant player in the global aluminium products will shell out Rs. 120 Crores to buy out the

unit.

Japan Seeks Relaxation of Banking Norms for Foreign Banks Operating in India

Japan has formally approached the Finance Ministry and the Reserve Bank of India looking for

relaxation in guidelines for its banks operating in India. The Japanese banks Mizuho Corporate

Bank Ltd. and The Bank of Tokyo- Mitsubishi UFJ Ltd have branches in India, while Sumitomo

Mitsui Banking Corp has a representative office in India. The present norms require the foreign

banks to first open branches in non-metro cities and then shift to urban centers apart from

allocating 32% of their lending to the priority sector consisting of Agriculture, Small scale

Industries, Export Credit, Education loans, etc.

The relaxation sought will target its dwindling profit margins as their main clientele consists of

large corporate entities and not businesses engaged in rural activities.

Nissan to Set up a 1,700 Crore Plant on the Outskirts of Chennai

Japanese automaker Nissan plans to set up a factory producing the Datsun range of low cost

small cars, most likely near the Renault- Nissan factory at Oragadam. This is in an effort to

revive the company’s brand which has the potential to contribute to half of its sales.

Japan’s All Nippon Airways to be the Next Gateway Carrier

Japan’s ANA has made plans to become a gateway to US for Indian passengers i.e. US bound

passengers will now be able to reach their destination via the Japanese transit hub – Tokyo.

Apart from daily flights from Delhi and Mumbai, the carrier plans to increase the capacity for

Mumbai by threefold. Not only this, it even plans to fly to Chennai four times a week and to

Bangalore thrice a week.

Japanese Financial and Retail Chain 7-Eleven is Considering Entering the Indian White

Label ATM Space

White label ATMs are those Automatic Teller Machines which are set up, owned and operated

by Non Banking Companies. The sector has been opened up for Non-banking entities in India by

the apex bank to increase penetration of alternative payment channels in semi-urban and rural

areas.

The Japanese Financial and retail chain player, 7-Eleven, plans to enter the country through its

Japanese banking unit “Seven Bank” which has an ATM business arm.

Japanese Auto-Component Makers to Enter India through Set-Up in Tamil Nadu

A delegation of 46 Japanese MSMEs with more than 40 being from auto component sector are

on a spree to explore investment opportunities in Tamil Nadu. This comes after large Japanese

Automobile companies have taken the country by a storm. Tamil Nadu is home to over 300

Japanese companies who would benefit from the entry of these Tier-2 component makers in this

Indian state.

Japan’s KYB Corporation acquires 50% stake in Conmat System Private Limited

The Japanese construction equipment manufacturer has acquired the stake in Conmat Systems

Private Limited for Rs. 100 Cr. KYB will have a representative on the Company’s Board while

the existing management of Conmat will continue to operate. The Company’s name will

however be changed to KYB- Conmat Private Limited.

Over the next 3 years, Conmat, a company having its presence in various segments like

construction equipments, material handling equipments, storage solutions and Oil & Gas

pipeline, plans to set up a new manufacturing unit and make an investment of Rs. 100 Crore.

Japanese Manga for India

American Company Vertical Inc. announced its plans to launch Japanese Manga in the Indian

Market at the 3rd Annual Indian Comic Con held in New Delhi. Japanese Manga has been

gaining popularity in India and is made available in the country by online book stores through

imports from other countries. The formal launch of Manga is likely to decrease the cost

significantly and will result in better knowledge about Japanese form of comic art in the

subcontinent.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility is now accepted as a means to achieve sustainable

development of an organization. Hence, it needs to be accepted as an organizational objective.

The Companies Bill, 2012 will make Indian companies to consciously work towards that

objective, as it requires a prescribed class of companies to spend a portion of their profits on

CSR activities.

Businesses can no longer limit themselves to using resources to

engage in activities that increase their profits. They have to be

socially responsible corporate citizens and also contribute to

the social good. Corporate Social Responsibility (CSR) is

about integrating economic, environmental and social

objectives with a company’s operations and growth. Many

consider CSR philanthropy, but that is a limited definition. An

organization can accomplish sustainable development if CSR

becomes an integral part of its business process.

CSR impacts almost every area of operations: governance and ethics; employee hiring, providing

opportunity; stakeholders benefit sharing and energy usage and environment protection. The

Companies Bill, 2012 intends to inculcate the philosophy of CSR among Indian companies.

STIPULATIONS OF THE COMPANIES BILL, 2012

Every company with net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or

more or a net profit of Rs 5 crore or more during any financial year to constitute a CSR

Committee of the Board consisting of three or more directors, of which at least one

director shall be an independent director

The Board’s report to disclose the composition of the CSR Committee

The main functions of the CSR Committee are to:

Knowledge Center

(a) Formulate and recommend to the board, a CSR policy indicating the activity or activities

to be undertaken by the company as specified in Schedule VII of the Act;

(b) Recommend the amount to be spent on these activities; and

(c) Monitor the company’s CSR policy periodically.

After the CSR Committee makes it recommendations, Board of the company shall approve

the CSR Policy and disclose contents of such policy in its report and also place it on the

company’s website. Further, details about the policy developed and implemented by the

company on CSR initiatives during the year to be included in the Board’s report every year.

Board to ensure that the activities listed in the CSR Policy are undertaken by the company

Board to ensure that at least 2% of average net profits of the company in the three

immediately preceding financial years are spent in every financial year on such activity.

Preference to be given to the local area and areas around the company operates for CSR

spending.

If a company fails to provide or spend such amount, Board to specify reasons in its report

for that failure

Companies required to comply with CSR shall give additional Information by way of notes

to the Statement of Profit and Loss about the aggregate expenditure on CSR activities.

Schedule VII of the Companies Bill 2012 prescribes activities that may be included by

companies in their CSR policies

Eradicating extreme hunger and poverty;

Promotion of education;

Promoting gender equality and empowering women;

Reducing child mortality and improving maternal health;

Combating human immunodeficiency virus, acquired immune deficiency syndrome,

malaria and other diseases;

Ensuring environmental sustainability;

Employment enhancing vocational skills;

Social business projects;

Contribution to the Prime Minister's National Relief Fund or any other fund set up by

the central government or the state governments for socioeconomic development and

relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other

backward classes, minorities and women; and

Other matters as may be prescribed.

EXISTING ACT:

There are no mandatory provisions in The Companies Act, 1956 on CSR

IMPACT/ INDUSTRY RESPONSE

With CSR spending becoming mandatory for prescribed class of companies, there is bound to be

increased engagement of companies with social and development projects. So far, there were

only voluntary guidelines for companies to follow.

The rationale for CSR activity is that corporates earn their profit by exploiting different

resources of the society, and so a portion of the benefit derived by them should be channelled

for the betterment of society.

Though compulsory CSR spending may seem burdensome for some class of companies, it

will create of a sense of responsibility among corporates, especially when they see benefits in

the long term.

Children, women, uneducated, and unemployed would be among the beneficiaries as CSR

activities may be focused on them.

The intention of policy makers is quite clear - to report business community’s contribution

for fulfilment of social, environmental and economic responsibilities. While contribution to

the local community is a good objective, businesses should choose social, environmental and

economic activities that contribute to society at large.

CSR activities will also help improve the image of a company within the society as one that

cares for the community.

Significantly, there is no penalty for defaulting on CSR norms. Only an explanation is to be

given by the board in its report for such non-compliance. So, it seems there is no real

coercive factor.

The Government has adopted a “Gandhi wad” with the provision - either contribute to

society or inform to society why you are not contributing.

Existing CSR Activities of some companies

Company Name Major CSR Initiatives

ITC Ltd e-Choupal, social & farm forestry, watershed development,

women's empowerment, livestock development, primary education

Infosys Employees take up social causes like education, rural rehabilitation

and inclusive growth. energy conservation, water sustainability,

afforestation, waste management, awareness on carbon footprint

Jubilant Work

Sciences

Basic healthcare facilities, supporting government rural primary

education system, developing resource pool through vocational

training programmes

Reliance

Industries Ltd

Health, education, infrastructure development (drinking water,

improving village infrastructure, construction of schools etc.),

environment (effluent treatment, tree plantation, treatment of

hazardous waste), relief and assistance in the event of a natural

disaster, and miscellaneous activities such as contribution to other

social development organizations

Illustration of Expected contribution for CSR after the CSR provisions come into force:

No. Name of the companies Average Profits

(of the FY 2009-

10, 2010-11,

2011-12)

(Amount in Rs.

millions)

Proposed

contribution in CSR

(2% of the Average

Profits)

(Amount in Rs.

millions)

1. GAIL (INDIA)

LIMITED

34,516.03 690.32

2. HINDUSTAN

UNILEVER LTD

23,998.00 479.96

3. Infosys 69,053.33 1,381.07

4. Larsen & Toubro Ltd 42,633.03 852.66

5. NTPC Ltd 90,181.73 1,803.63

CONTACT US

PANKAJ SINGLA

Japan Desk, Corporate Professionals

DELHI (Head Office)

D-28, South Extension Part - I, New

Delhi – 110049

Tel: +91-11-40622200

Dir: +91-11-40622293

Fax: +91-11-40622201

Mob:+91-99715-08320

Email: pankaj@indiacp.com

MUMBAI:

403-404, Churchgate Chambers, 5 New Marine

Lines, Mumbai-400020

Tel: +91 22 22624671

Fax: +91 22 22655712

Email: info@indiacp.com

FARIDABAD (DELHI NCR):

565, Sector-7B, Faridabad, Haryana-121006

Tel: +91 129 4061130

Fax: +91 129 2241017

Email: info@indiacp.com

Bedford (UK)

2-4 Mill Street, Bedford MK40 3HD U.K.

Tel: +44 (0) 2030063240

Fax: +44 (0) 2030063241

Email: info@indiacp.com

DISCLAIMER: The entire contents of this document have been developed on the basis of relevant statutory provisions and as per the

information available at the time of the preparation. Though the author has made utmost efforts to provide authentic information however, the

material contained in this document does not constitute/substitute professional advice that may be required before acting on any matter. The

document has been produced only for the informational purposes; the author and the firm expressly disclaim all and any liability to any person

who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such

person in reliance upon the contents of this document.