India is a unique market to sell in. India brings to the table lot of interesting factors to be analysed before considering selling in India. What are these factors? Well, you need to start brainstorming right from the start about:-
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Customers
- Are there any customers?
- What is their socio-economic profile?
- Where are they located?
- Who is the currently selling to them? their product / price / quality / service
- Can we penetrate with current specifications or we need some customization?
Price
- Pan India & Local price mapping?
- How much is the price sensitivity in the local market?
- What customers prefer?
- Local policies affecting price?
- What are different ways to ensure price efficiency?
Competition
- Who are the key players?
- Where are they located and reasons of their choice?
- What matrix of competitive advantage exist – local vs foreign?
- .What need gaps exist?
Entry route
- Through a local partner / distributor?
- Do we need legal presence? * ESO (Enhanced Sales Operation) with incubation support
- Do we have to hire sales team?
- Do we need to partner with a local player? Contract manufacturing / Merge or Acquire
- Right time for own production / manufacturing plant?
Supply Chain
- How to efficiently supply products to the customer?
- Whether setting up own distribution network is beneficial?
After Sales
- Whether to outsource or establish own after sales team?
- How to go about with the tech training & spare parts supply order?
- Best way to manage & review sales performance?
Success is inevitable if we can answers these questions rightly i.e. right methodology. A right methodology require maximum primary interactions and a fact based deduction. Having said that, values cannot be ignored but limited to the consumer behaviour and preferences.
Entering India
FDI routes:-
- Automatic route: under automatic route foreign individuals/companies do not need a prior government/ Foreign Investment Promotion Board (FIPB) approval for investment in India.
- Approval route: a prior approval of the government, considered by FIPB in activities not covered under the automatic route.
Mode of Entry:-
- Enter as an Indian company – by registering under private or public limited company under Company’s Act, 2013 in following ways: –
- As a JV – by forming a Joint Venture with an Indian firm in the partnership in the ratio of 51: (49 foreign entity)
- Wholly owned subsidiary (WOS) – This mode is open in the areas where 100-percent FDI has been allowed by the government. In this mode the foreign company can hold 100 percent ownership with them.
In order for companies to register, an application needs to filed with ROC or Registrar of Companies. Once a foreign company completes the due diligence and registers itself with ROC, it becomes subject to all the laws that are applicable to any Indian company. For example, labour law, PF, ESI, tax etc., all have to be as per defined Indian standards.
- As a foreign company – setting up base in India as a foreign company by either of the following ways:
- Liaison office – also known as representative office, they act as connecting link between the head office and its entities in India. They cannot indulge in any commercial activity, their role is to study the market in India and disseminate the information to the parent company. It can only export or import from or to India and also helps in aiding the technical partnership between the parent company and companies of India.
- Branch offices – this way is the best for those foreign companies who are in the business of manufacturing and trading. It serves the following purpose:
- Export and import of goods
- Carry research work
- Consultancy services
- Rendering technical support to the products supplied by the parent/group companies.
- Promoting technical collaboration between the parent company and other companies in India
- Rendering IT services in India
- Project office – the best way for companies that are looking towards India for specific projects. Project offices are not allowed to carry out any other work apart from those specified at the time of establishment.
- Registration of the entity:-
- Two people or companies in case of private limited company and seven people or companies in case of public limited company
- One director must be resident of India i.e., he must have been residing in India for 182 days or more in the preceding financial year)
- Indian address
- Registration of the company
- Reporting to Reserve Bank of India.
- FDI in Limited Liability Partnership:-
The foreign nationals/companies can now enter India as Limited Liability Partnership. The LLP makes you responsible only to a limited amount of debts for a company, but requires pre-approval from the government in FDI as compared to the private limited company.
- With 100 percent FDI in LLP there are certain norms that are to be followed:-
- An LLP operating in sectors/activities where 100 percent FDI is allowed under the automatic route of FDI scheme would only be eligible to receive FDI.
- LLP shall not be eligible to accept FDI in sectors in which less than 100 percent FDI under automatic route
- LLP shall not be eligible to accept FDI in sectors in which FDI is allowed under government approval route
- FDI in a LLP shall always require prior government/FIPB approval
- No FDI in LLP to operate in agriculture, real estate, plantation and print media
- Foreign venture capital investors and FPI or foreign portfolio investors will not be allowed to make investment in LLPs
- In the case of LLP with FDI, that has a body corporate as a designated partner or nominates someone as a designated partner (as defined in h).Section 7 of LLP Act 2008) must be a company registered under the Company’s Act 1956/2013.
- FDI in private limited & public limited vs LLP – we find the following differences:-
- In case of private limited/public limited company FDI is allowed in both automatic route and approval route, whereas in case of LLP, FDI is allowed only in automatic route.
- LLPs investing in sectors that fall under category of automatic route still need to take government/FIPB approval, whereas in case of private limited/public limited company if investment is made in automatic route no prior government/FIPB approval is required