Not the best of times

S Kalyana Ramanathan / London July 28, 2010

Many British companies have had a long presence in India, but other countries are overtaking levels of trade between the two

Despite the long history, UK-India trade ties at present are not at their best. From being the fifth largest source of import for India just five years ago, UK has slipped to the 18th position now. Experts also claim that UK’s foreign direct investment (FDI) into India has fallen steadily over the last five years.

According to some estimates UK-India trade is around £11.5 billion. UK is also the top European investor in India while India is the top Asian investor in the UK, according to the UK India Business Council (UKIBC). Indo-UK trade has been growing at a compound annual growth rate (CAGR) of 14 per cent since 2001.The trade in merchandise has been growing at a CAGR of 13 per cent while that in services has registered 15 per cent growth.

The scheduled visit of UK’s new Prime Minister David Cameron is likely to address the economic ties between the two countries, giving them the highest priority.

In 2008 (the latest year for which numbers are available), the UK was the fourth largest investor in India after Mauritius, Singapore and USA, with £ 3.87 billion of FDI stock, according to ONS in the UK. The sectors that attracted most investment from UK into India are energy, telecom, IT, financial services and retail.

Starting from the days of the East India Company, several large British companies have thrived — as they continue to thrive — in India. Some of the better-known include FMCG major Hindustan Unilever, BP (earlier known as British Petroleum), HSBC, Cadbury, GlaxoSmithKline Pharmaceuticals, Standard Chartered Bank, British Airways, Virgin Atlantic, Rolls Royce, Reuters, JCB and Vodafone.

Some of them have been in India for several decades now: Standard Chartered Bank and HSBC began their Indian operations in the mid-nineteenth century; Hindustan Unilever started out in India in the 1930s; while others like Tesco and Marks & Spencer have made their India forays only in the last five to 10 years. Car maker Jaguar Land Rover made its entry into India only in the last year or so, after India’s Tata Motors bought the company in 2008. For JLR, India for now is only a market for the sale of its products, and the company does not have a manufacturing base in India.

British companies feel that the sectors they are strongest in — such as retail and financial services — remain under tight government control. This in part explains M&S and Tesco’s presence in India as cash and carry ventures that address only the wholesale market.

One of the most successful British companies in India is Hindustan Unilever Ltd (HUL). HUL today is India’s largest fast moving consumer goods company, with leadership in home and personal care products and foods and beverages. The company says its brands touch the lives of two out of three Indians. With sales revenues of Rs 20,239 crore for the 15-month period January 1, 2008 to March 31, 2009, HUL employs over 15,000 people in India. Its British parent Unilever holds about 52 per cent of the equity.

Standard Chartered Bank is another British success story in India. Since opening its first branch at Kolkata in 1858, Stan Chart has played a significant role in the Indian banking sector and recently completed 150 years of existence.

Standard Chartered Bank India is the country’s largest international bank, with 90 branches across the country and now has approval from banking regulator Reserve Bank of India to open four more. It has over 8,000 employees and was the second largest contributor to the UK-based group’s profits in 2008. Vodafone Essar is the Indian subsidiary of Britain’s Vodafone Group and commenced operations in 1994, when its predecessor Hutchison Telecom acquired the cellular telephone licence for Mumbai. The company now has operations across the country with over 100 million customers, which accounts for nearly a third of its total customers worldwide. Vodafone is the world’s leading international mobile communications group, with about 333 million proportionate customers as on 31 December 2009.

GlaxoSmithKline Pharmaceuticals Ltd is one of the oldest pharmaceuticals company and employs over 3,500 people. Globally, the company is a $45 billion research-based healthcare and pharmaceutical company. In India, the company is a market leaders with a turnover of Rs 1,880 crore and a market share of 5.7 per cent.

Earthmoving and construction equipment major JCB India Limited started operations in 1979 as a joint venture company. In 2003, parent company (JCB UK) acquired the entire shareholding and today JCB is the fastest growing company in the Indian earthmoving and construction equipment industry. JCB has a park of over 80,000 machines and out of every two pieces of construction equipment sold in India, one is a JCB product.

Apart from Standard Chartered, banking company HSBC also has long historical ties with India. The antecedents of the HSBC Group in India can be traced back to 1853, when the Mercantile Bank of India, London and China set up its base in Mumbai with an authorised capital of Rs 5 million. Today HSBC India has over 2.2 million individual resident Indians as well as Non-resident Indian customers across India, USA, UK, Middle East and South East Asia.

British Airways was one of the earliest global carriers to enter India. Today BA offers a choice of 45 flights every week from five key cities — Delhi, Mumbai, Bangalore, Chennai and Hyderabad — to London Heathrow and other destinations worldwide.

Probably the most popular British company in India would be confectionery company Cadbury, which was recently acquired by US rival Kraft. In India, Cadbury began its operations in 1948 by importing chocolates. Over 60 years later, it has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (near Gwalior), Bangalore and Baddi (Himachal Pradesh) and four sales offices (New Delhi, Mumbai, Kolkota and Chennai).

Cadbury in India enjoys a value market share of over 70 per cent — the highest Cadbury brand share in the world!

Source: UKIBC, UKTI, British High Commission (Chennai) and company websites