Foreign Direct Investment On Rise In Indian Electrical Companies

Online, August 5, 2010 (Newswire.com) - [For Immediate Release]
(New Delhi, Aug 04, 2010): According to the Indian Electricals and Electronics Manufacturers Association (IEEMA), the number of foreign direct investments targeting companies in the electrical products industry has increased in recent times. The agency revealed that major electrical products companies in the world are increasingly taking up acquisition investments in the country, with the latest being the takeover of Indo Asian Fusegear's Switchgear division for an estimated Rs 600 crore by the giant French electrical equipment company Legrand Group.

The agency also revealed that the Indian domestic electrical equipments market is growing at an impressive 20% per annum; giving foreign major global firms a reason to increase their presence in the country to capitalize on this growth rate. Additionally, the Indian domestic electrical equipments industry has also benefited from the slowed growth being experienced by the developed world in their domestic sectors, whereas India's is burgeoning steadily.

The number of foreign acquisitions has been increasing steadily as well; back in March, Schneider Electric, a French Giant global company, made an investment takeover of Zicom Electric Security Systems for about Rs 224.7 crore. Asian giant majors were not left behind either, with Japan's Matsushita Electric announcing its takeover of about 80% of Mumbai Company, Anchor Electricals for an estimated investment of Rs 2,000 crore. To know more about the foreign direct investments in various sectors and industries of India, visit http://www.investinindia.com.

According to the Electricals sector body, IEEMA, the rise in foreign direct investments in the electrical equipments sector is a result of the burgeoning demand for space in the real estate sector. Additionally, it could be motivated as well by the country's consumers who are increasingly becoming aware of their products and thus demanding quality, as such; domestic companies may have to spend a lot more on their productivity.

According to the association's president, Murli Venkatraman, the domestic players in the electrical market have come against a stiff challenge from the cheap products that flow in from China and are incapable of matching the advanced products that the international players have to offer. When looked at in terms of profitability, the latest acquisition of Indo Asian Fusegear's switchgear division perhaps gives a symbolic representation. Whereas it was acquired for about Rs 600 crore, Indo Asian Fusegear's net profit for the financial year ended March 31st was pegged at a paltry Rs 2.85 crore. Therefore, with such low profits, Indo Asian Fusegear could not be able to up its productivity level to a higher growth rate.