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'Firms with FDI from Mauritius rank highest in exports intensity'

Raw materials, components and capital goods continued to form a significant part of the total imports by the foreign direct investment, or FDI, companies, according to the Reserve Bank of India's, or RBI's, latest analysis.

''Companies having FDI from Mauritius ranked the highest in terms of exports intensity of sales at 17.5 per cent in 1996-97," the RBI analysis says.

Among the industry-group, in respect of 'engineering' and 'chemical' companies, export intensity of sales was at 6.7 and 7.4 per cent, respectively, in 1996-97, as compared to 6.9 per cent and 6.6 per cent, respectively, in 1995-96, it says.

The RBI analysed the financial performance of the foreign direct investment companies for the period 1994-95 to 1996-97, based on the audited annual accounts of 268 selected companies, which closed their accounts during April 1996 to March 1997.

"The import to export ratio of the selected companies worked out to 177 per cent in 1996-97. With 42.6 per cent increase in imports, the total expenditure in foreign currencies of these companies increased by 40 per cent, and raw materials, components, and capital goods continued to form a significant part of total imports," the report says.

About the overall performance of the FDI companies, the RBI analysis says, "The financial performance of the 268 selected FDI companies in 1996-97 was good, but less impressive, as compared to the previous year in terms of improvement in sales and gross profits."

''Profit margin and return on shareholders' equity declined in 1996-97 as compared to the preceding year. The effective tax rate, or tax provisions to profits before tax, was higher for the year under study as compared to the previous year," the report says.

"The major sources of assets formation in 1996-97 were incremental borrowings from companies, depreciation provisions and fresh equity raised with premium, it says.

"The above trends in performance were observed to hold good, both industry-wise as well as investor country-wise groupings. However, the performance of the selected companies belonging to textiles and rubber industry-groups were rather subdued in 1996-97," the report says.

As regards the operational results of the FDI companies, these companies succeeded in raising their sales and gross profits by 11.9 per cent and 8.1 per cent to Rs 427.44 billion and Rs 55.33 billion, respectively.

"The effective tax rate was higher at 37.9 per cent in 1996-97, as compared to 35.1 per cent in 1995-96. Pre-tax and post-tax profits of these companies declined by 1.2 per cent and 5.5 per cent, respectively, in 1996-97."

"Return of shareholders' equity declined from 18.1 per cent in 1995-96 to 14.5 per cent in 1996-97," the RBI analysis says.

A country-wise analysis shows that in contrast to other countries, companies having major portion of FDI from Britain posted higher profit margin or 16.3 per cent in 1996-97 as compared to that in the previous year.

The profit margin was the highest at 19.8 per cent with Sweden holding the major portion of FDI.

"Industry-wise, engineering and chemical companies recorded lower profit margins of the order of 11.8 and 123.8 per cent in 1996-97 as compared to 12.6 per cent and 14.0 per cent, respectively, in the previous year," the report reveals.

Discussing the issue of 'foreign business', the RBI report says "There was a net outflow of Rs 34.02 billion in foreign currencies as against an outflow of Rs 15.68 billion in 1995-96."

"The total foreign exchange earnings to these companies grew at about the same rate of 11 per cent in 1995-96 and 1996-97," it says.

The growth in exports was at 12.1 per cent in 1996-97 as against 14.6 per cent in 1995-96, the report says.

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