The Hindu Business Line : Private cos too attract FDI slice

THEY might not be household names in the domestic corporate firmament, but privately-held outfits are proving to be no slouches when it comes to attracting foreign direct investments (FDI).

Approvals granted over the past four months indicates that FDI has found its way into a diverse set of industries, which includes food distribution services, airlines, media and healthcare, to name a few.

Investments by the Mauritius-based Ellsberry Holdings in Radhakrishna Foodland, a Thane-based foodservice distribution outfit, and that by Nitrex Mauritius, in the Delhi-based Fragrant and Flavour Chemicals, are both for a stake of 100 per cent.

Several small-sized deals have also been struck such as those of Ma Foi Management Consultants, Deccan Aviation and Shringar Films.

According to Mr Amol Jain, Vice-President at DSP Merrill Lynch, small companies were earlier perceived to have a weak competitive structure and were not considered to posses the ability to scale up; there were also exit-related issues as well. "However, things have changed and smaller companies are now being viewed as viable investment options," he added.

In Mr Jain's view, small companies have, over the years, improved on their competitiveness and are now being seen as globally competitive. Citing the instance of what is being witnessed in the pharma, textile and auto-ancillary sectors, he said that the ability to target a global market makes it easier to scale up.

Mr Jain stated that the robustness seen in the capital market could also make it feasible for smaller companies such as the ones that have seen received FDI flows, to provide investors an exit route through an initial public offering.

Another source in the investment baking community said that FDI flows into small and mid-sized companies would have a beneficial effect from a medium to long-term perspective. According to him, not only do such flows serve as a signal of confidence, they could also enable such firms to move to a position of superior financial strength, as FDI backing would enable such companies to raise debt at rates lower than what may otherwise be the case.

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