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Assembly set-up for a German manufacturer of heavy load vehicles

Engagement: A German manufacturer of heavy load vehicles was in the advance stage of discussions with a private industrial park developer for land acquisition in India. Since the Indian subsidiary was not incorporated and the selected land was prime property, the client needed to arrange for funds immediately from its German parent company to acquire the land, which could result in issues under the Foreign Exchange Management Act (FEMA).

Preliminary Mandate: Real estate assistance and funding advisory for the proposed India project

Solution/Value Delivered
SKP partnered with the client and assisted in arranging funds and finalising the land deal. The key deliverables of this assignment were:

  • Real Estate Assistance: We acted as an extended arm of the parent company in negotiations and discussions with the industrial park developer. Our inputs resulted in an understanding between the two parties that the best way to finalise the deal was to first incorporate the Indian subsidiary and then fund the land acquisition. Our commercial inputs during the negotiation led to a waiver of additional charges, an extension of the lease period and acceptance of clauses allowing sub-letting to related parties, thereby improving the client’s supply chain.
  • Funding Advisory: We evaluated the client’s preliminary business plan for India to customise the projected financials in the Indian context. Our extensive experience and knowledge of the Indian business environment was leveraged to give realistic numbers for human resource costs, selling, general and administrative expenses (SG&A), production costs and tax implications. Using the detailed business plan to assess capital requirements and with our regulatory knowledge, we were able to decide on the capital structure and timing of fund flow.
  • Jurisdiction Analysis: We created detailed notes and worksheets to evaluate and explain the optimum holding company jurisdiction from the perspective of ease of inward remittance as well as profit repatriation.

SKP is involved as their India partner and representative to all external stakeholders in India such as real estate, contractors, government authorities, suppliers/ vendors, etc.