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Financing and Investment Opportunities in Developing Countries

Learn how to find financing for your projects in emerging markets and manage challenges such as credit risk, corruption, and decision-making. Explore investment opportunities in India and other developing countries.

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Financing and Investment Opportunities in Developing Countries

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  1. Introduction to IFU Investment Fund for Developing Countries MEGAsteps, Aarhus Investeringsmuligheder - Indien 4. Juni 2013 Ib Albertsen, Senior Investment Manager

  2. Where will you find financing for your planned production site in Ethiopia when your Danish bank looks at you in horror? Financing in emerging markets poses testing challenges… • How will you manage credit risk and working capital needs to a rapidly expanding customer in Indonesia? • How can you protect yourself from corruption in Bangladesh – one of the most corrupt business environments in the world? • How will you manage transparent decision-making and reporting when co-operating with a Chinese partner who has never been in a partnership with a foreign partner before?

  3. ECONOMIC OUTLOOK Euro Area 2012 2013 2014 -0.6 pct. -0.3 pct. 1.1 pct. USA 2012 2013 2014 2.2 pct. 1.9 pct. 3.0 pct. China 2012 2013 2014 7.8 pct. 8.0 pct. 8.2 pct. Insert picture in right size Picture format = H 10.3 x W 22.2 cm India 2012 2013 2014 4.0 pct. 5.7 pct. 6.2 pct. Sub-SaharanAfrica 2012 2013 2014 4.8 pct. 5.6 pct. 6.1 pct. Latin America 2012 2013 2014 3.0 pct. 3.4 pct. 3.9 pct. Source: IMF World Economic Outlook, April 2013 Event: Add event via 'View' / 'Header & Footer'. Max one line

  4. The markets of tomorrow will be shaped by new players

  5. IFU is a self-governing fund established in 1967 owned by the Danish government IFU’s purpose is to promote economic activity in developing countries and new emerging markets IFU will advise and invest together with Danish companies in developing countries in commercially viable projects IFU operates on commercial terms IFU’s instruments are equity investments and/or loan financing Annualactivity: 30-35 new investments 20-25 additional investments DKK 500 – 600m (USD 90 – 110m) Portfolio: 787 projects/86 countries 223 active Who is IFU?

  6. Investment countries and offices Investment limit USD 6,138 (2012) Others 5% Beijing Cairo Insert picture in right size Picture format = H 10.3 x W 22.2 cm New Delhi Asia 50% Accra Nairobi Africa 30% Latin America 15% Johannesburg IFU Offices

  7. Examples of IFU’s Danish partners SME’s (60%) Big companies (40%)

  8. Duration • 5-8 years • 5-7 years in $, EUR, DKK • Put/call agreement with the Danish partner at market value • Exit agreement from the start • Repayment, 1-2 years grace Exit Financing – an overview of IFU’s guidelines • Maximum of DKK 100 millions per project, though- Max. 30% of total financing for projects (higher for smaller projects)- Max. matching the Danish Partner(s) Amount Equity HEADER:Arial Regular 22/26Max two lines. CAPS Text: Arial Regular 16/19 Click on ’Increase Indent’ for more bulletdesign To get previous design back, click on ’Decrease Indent’ Insert picture in right size Picture format = H 12.3 x W 10.4 cm Loans – secured or unsecured

  9. What does IFU bring to the table? • Network & expertise • 40 years of experience from developing countries and emerging markets • Regional offices in Egypt, China, India, Kenya, South Africa and Ghana • Know-how about local investment conditions • Hands-on during preparation and implementation • Political “insurance” • “Quality mark” • International network of development finance institutions • Financing • Equity and/or loan financing (without recourse to partners)

  10. IFU IN INDIA Active projects: 19 Total projects (1968-2013): 87 Amountinvested: DKK 755.7m Expected 4-5 new investmentsannually Office in New Delhi since 1997 Examples of our partners Our team in New Delhi Event: Add event via 'View' / 'Header & Footer'. Max one line

  11. Main opportunities when investing in India • High growth (projected economic growth to surpass 6-7% annually) • Large domestic market - growing middle class population • Increasingly well-educated, yet relatively low cost workforce • Young, ambitious population (64% of its population 15-64 years) • English speaking • Multicultural • Growth sectors: infrastructure, clean tech, retail, ICT, manufacturing, agriculture

  12. Case I – Danish Steelcluster/Rool Danish Steel, a company engaged in fabrication of metal parts and components, established in 2005 in India Target Market Initially only exports, supplying mainly to parent company in Denmark Now having a diversified customers base with almost 50% local sales in 2010 Has benefited from high growth in Indian market Set-up in India Located in Bangalore, South India Employing a total of 65 people Managed by a local professional CEO Total investment of DKK 20m, IFU’s total investment in SC and Loan is DKK 7m IFU’s Role Establishment and location advice, start up capital, holding 42.3% of the shareholding in the Company Additional financing of the company three times since 2006 with cumulative loan of DKK 5.5m Active participation in the Board, advising on recruitments, regulatory matters, obtaining local financing etc. PAGE 12 30/05/2013

  13. Case II: Orana India Pvt. Ltd.Activity: Production of fruit compounds Established: 2005 Expected total investment: DKK 11m IFU’s contracted participation: DKK 0.3m Calculating carbon savings

  14. Bureaucracy Too much paper work! Political interference in larger projects e.g. infrastructure Lack of infrastructure Roads, ports, railways, housing in remote areas, schools Inadequate power supply Lack of warehouse space and cold chains Complicated tax structure and transfer pricing regulations Different taxes and duties across states Quality and reliability Supply chain and business relationships Labour costs Increasing wages with only limited increase in productivity Corruption… Main challenges when investing in India

  15. Export & Investments – Not conflictingtargets • Access to new markets • Createseconomicgrowth at home & abroad

  16. What do we require from our partners? • A strong business case • Experience within the industry • Solid management experience • Organisational and strategic commitment • Financial strength

  17. Corporate Social Responsibility - CSR • ■ CSR selfassessment • - Human Rights & Labour Rights • - Occupational Health & Safety • - Environment & Climate • - Anti-Corruption • - Community Development • ■ CSR Action Plan

  18. Some key lessons learned from investing with Danish partners • Projects require more money than initially thought and take longer to implement • Good idea to approach IFU at an early stage of the project to ensure flexibility going forward • Pay attention to legal issues • Think through the full value chain requirements of your project – often the suppliers and business partners are not there HEADER:Arial Regular 22/26Max two lines. CAPS Text: Arial Regular 16/19 Click on ’IncreaseIndent’ for more bulletdesign To getprevious design back, click on ’DecreaseIndent’ Insertpicturein right size Picture format = H 12.3 x W 10.4 cm

  19. How to get IFU involved? – give us a call or send a mail! HEADER:Arial Regular 28/33. CAPS Text: Arial Regular 16/19 Insert Name in first line, Title in second line, Contact info in third line Ib Albertsen Senior Investment Manager Tel: +45 33 63 75 49 IBA@ifu.dk IFUFredericiagade 271310 Copenhagen KDenmark Tel. +45 33 63 75 00Fax +45 33 63 75 99ifu@ifu.dkwww.ifu.dk

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