Bureaucracy still plaguing Indian investment arena

A top investment executive with a global fund manager has revealed bureaucracy is continuing to make investment in India by offshore entities a difficult process.

Aberdeen Asset Management investment manager Asia ex Japan Andrew Gillan said one area red tape procedures are playing a part in stifling the investment process in India is listings on the local stock exchanges. He used the initial public offer (IPO) experience of Indian property company DLF to highlight the point.

“One of the biggest IPOs to come in across Asia is DLF, but they still haven’t managed to get all of the necessary paperwork together to do it. They were ready to go last May, but the markets corrected and they decided not to do the IPO. Then they came again early this year but are still waiting for permission from the authorities to go ahead with its multi-million dollar IPO,” he explained.

In addition to this hurdle, property companies like DLF also face restrictions regarding the amount of property they are allowed to own.

“This company, DLF, comes to the market with a prospectus and within that there are hundreds if not thousands of entities simply because they have so much land, but there’s a limit to how much land each entity can hold,” Gillan said.

“So there are still issues you need to be comfortable with when investing in these types of companies, which you are not necessarily facing when investing in property in Australia,” he warned.

According to Gillan, bureaucracy is also inhibiting overseas investment into much needed infrastructure projects in India.

“The reason why foreigners aren’t investing in infrastructure is the returns and the agreements with the government are not in place for foreigners to be comfortable to plough lots of money into some of these projects with the associated risks,” he said.