Mizuho zeroes in on target sectors for Japanese investments in India

Mizuho Financial Group has identified sectors like electronics, auto, energy, transportation and social infra for a focused investing approach

Utpal Bhaskar
Updated3 Mar 2017
Mizuho Financial Group has been tasked by the Japanese government to find investment opportunities in India. Photo: Bloomberg
Mizuho Financial Group has been tasked by the Japanese government to find investment opportunities in India. Photo: Bloomberg

New Delhi: Mizuho Financial Group, which has been tasked by the Japanese government to find investment opportunities in India, has identified sectors such as electronics, automobiles, energy, transportation and social infrastructure for a focused investing approach.

According to its report titled Visualizing India in 2030 and identifying potential industrial sectors and business opportunities for Japanese companies reviewed by Mint, the global strategic advisory department of Mizuho Financial Group recommended “earliest localization” for Japanese firms. Mizuho was awarded the research project by Japan’s ministry of economy, trade and industry (METI).

This comes against the backdrop of Japan pledging around $33 billion in investments in 2014-19 to boost India’s manufacturing and infrastructure sectors. In December 2015, Japanese Prime Minister Shinzo Abe said his government has made available a special financial package of over $12 billion for Japanese companies wanting to invest in India.

“Although India is one of the promising market with certainty of future growth, but as the Indian market (is) quite competitive and difficult to ensure and maintain profitability, Japanese companies has resistance for localization,” the report said.

“However, earliest localization of Japanese companies is required to exploit the future growing market,” the report added.

Queries emailed by Mint to Yasuhiro Sato, president and group chief executive officer, Mizuho Financial Group, METI and the Japanese embassy in New Delhi on late Wednesday evening remained unanswered.

Japan is among the top five sources of foreign direct investment in India, with the automobile and pharmaceutical sectors being among the biggest beneficiaries of Japanese investments over the past few decades. Prominent investors include Suzuki Motor Corp., Mitsubishi Motors, Toyota Motor Corp., Nissan Motor Co. Ltd, Daiichi Sankyo Co., JFE Steel Corp and Nippon Life Insurance Co.

Japanese investors have been looking at new opportunities in India such as the clean energy sector, a case in point being JERA Co. Inc., which last month bought a 10% stake in ReNew Power Ventures Pvt. Ltd for $200 million.

Set up in 2015, JERA is an equal joint venture between Japan’s largest utility Tokyo Electric Power Co. and Chubu Electric Power Co.

Experts say India offers a lot of investment potential for Japanese firms.

“Indian infrastructure today presents a compelling investment case for Japanese capital. Sectors like transportation and renewable energy have matured and yet have significant capital deployment potential,” said Srishti Ahuja, director at consulting firm EY.

“Also, as an asset class, infrastructure provides long term, stable returns and where development risks can be addressed through effective transaction structuring,” Ahuja added.

According to the Indian government, Japanese investment into India between April 2000-September 2016 was to the tune of $23.8 billion.

At an interaction at the Gateway House think tank in Mumbai last month, foreign secretary S. Jaishankar said, “geoeconomics will be more important with Japan than perhaps geopolitics at this time”.

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