India’s links to Dubai, and the UAE
11% of Gulf capital flows between in past few years headed to Asia
Indian are 40% of UAE’s population; forming 10-12% of India’s
inward remittances. 31% of the 5.3m Indians in the Gulf are in UAE.

UAE forms 8% of India’s non-oil exports and 3.0-3.5% of India’s nonoil
imports.

DP World operates five container terminals in India, accounting for
40% of India’s container traffic.

Real Estate: Emaar-MGF and DLF-Limitless are the key alliances for
investments into India. Sobha Developers had plans to build two residential
towers and two hotels in the UAE.

Construction: L&T has two joint ventures in the UAE, others with business
interests include Gammon India.

Banking: Bank of Baroda has 10 branches in the Gulf (largest), but mostly
small banking exposure, mainly for remittances. Bank lending to UAE funded
projects in India unknown.

IT Services: No material exposure. A few deals for Wipro and one for
Infosys.

Gulf investments across the world
Between 2002-2006, US$542bn of capital from the Gulf Co-operationg Council
(GCC) was invested elsewhere – where Asia took an 11% share (below Asia’s MSCI
weight of 14%). A majority of investments went to US (55%), followed by Europe
(19%).

Non-Oil trade – UAE dominates the India-Gulf link
India’s non-oil exports to the Gulf were about 12% of its total exports in FY07, and
exports to the UAE formed about three-fourth of this. Therefore, India’s non-oil
exports to the UAE were about 8% of its total exports. Similarly, UAE dominates
India’s non-oil imports from the Gulf- forming about half of the total imports from
GCC and about 3.0-3.5% of India’s global non-oil imports

Key case studies of Dubai projects in India and Issues
DP World
During his trip to Dubai in 2006, Indian Minister for Commerce and Industry Kamal
Nath had met top DP World officials and assured the smooth transfer of P&O’s India
assets to DP World. The Adanis had originally developed the first terminal at
Mundra which was being operated by P&O Ports. After P&O’s acquisition, DP World
started running Mundra International Container Terminal (MICT). However, the
Gujarat Maritime Board (GMB), the regulatory authority for ports in Gujarat
spearheaded the opposition to DP World’s takeover. GMB terminated DPW’s subconcession
agreement, against which DPW moved an Ahmedabad court, and then
the High Court, both of which upheld GMB’s decision. Note that DP World is the
single largest investor from GCC in India and is reported to have invested more
than US$2bn already.

Dubai Aluminium’s India foray
In 2005, L&T and Dubai Aluminium (Dubal) formed a joint venture to set up a 3
million tonne alumina refinery in Orissa. Dubal holds 74% stake in the JV with L&T
holding the remaining 26%. The total investment in the project was estimated to be
~US$4bn with expected commissioning of the first phase in 2010. But more than
three years after the announcement, the project is in limbo. Land acquisition
problems coupled with significant delay in obtaining various clearances have resulted
in deferment of the project. Dubai’s ruler Sheikh Mohammed had personally approved
this project and there is immense disappointment in Dubai government circles over
the inordinate delay in this project.

Istithmar’s investment in SpiceJet
Istithmar, the private-equity arm of the Government of Dubai invested US$12.5m
in SpiceJet in early 2005. Later in the year, Istithmar increased its total investment
by subscribing to SpiceJet’s foreign currency convertible bonds (FCCB). FCCBs had
a conversion price of Rs89.3 per SpiceJet share then. In January 2007, Istithmar
invested US$30m at Rs52 per share. At the same time, Istithmar also renegotiated
its FCCB conversion price to Rs57 per SpiceJet share. With the collapse of the
equity markets, it is said that Istithmar tried to renegotiate another decrease in the
conversion price of FCCB to Rs30 per share. However, Istithmar has preferred to
encash the bond and has sold US$25m worth of bonds to WL Ross. Istithmar’s
nominees on SpiceJet’s directorial board have been replaced by WL Ross nominees.

DP World operates 5 container terminals in India, 40% share
in container traffic
DP World, the Dubai government’s premier maritime company, is one of the largest
marine terminal operators in the world with 45 terminals and 13 new developments
across 29 countries. It operates five container terminals in India: the Nhava Sheva
International Container Terminal (NSICT) in Maharashtra and those at Chennai,
Kochi, Vishakhapatnam and Mundra and is developing two additional terminals at
Kulpi and Vallarpadam. The terminals at Kochi and Vishakhapatnam are DP World’s,
while Mundra, JNPT and Chennai’s container terminal came under the company’s
umbrella following its acquisition of P&O in 2006. In 2007, DP World handled 4m
TEUs (twenty-foot equivalent container units) in India, up from 2.5m in 2005, or
about 10% of its global total. DP World has almost 40% market share of container
traffic in India. In May, the company reported that it had US$2.4bn in investments
in India and is looking to increase that to US$15bn over the next five years.

Tags: bank of baroda dubai, dlf in dubai, dubai crisses, dubai recession, india dubai links, L&T dubai, spicejet dubai, UAE

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