Indo-Japan Trade & Investment Highlights • India’s AEG Group's Indian subsidiary to sell its manufacturing facility to Japan's Toshiba Mitsubishi-Electric • India's Coromandel to form JV with Japan's Yanmar, Mitsui Knowledge Centre : DEEMED PUBLIC COMPANY: Analysis of Applicability of Companies Act, 2013 on Indian Subsidiary of Companies Incorporated Outside India

1. 2014
Indo-Japan Trade & Investment
Bulletin
April Issue
Japan Desk, Corporate Professionals

2. Indo-Japan Trade & Investment Highlights
 India’s AEG Group's Indian subsidiary to sell its manufacturing facility to Japan's
Toshiba Mitsubishi-Electric
 India's Coromandel to form JV with Japan's Yanmar, Mitsui
 India's Stumpp, Schuele & Somappa Springs spins coil spring business into JV with
Japan's Mitsubishi Steel
 Japan's Suntory, India's Tilaknagar in race to buy Imperial Spirits
 Meidensha Corp buys 23% stake in Prime Electric
 TCS, Mitsubishi to create new Japan IT services firm
 Japan's Rakuten planning acquisitions to enter India
 Omron Automation opens 1st automation centre in India
 India, Japan meeting on amphibious aircraft deal in Tokyo
 Nissan India to scale up Chennai plant capacity
 Japan's LINE Corporation in talks with Indian telcos for collaborations
 Daiichi and Docomo exit, but India remains a hot market for the Japanese
Knowledge Centre
 DEEMED PUBLIC COMPANY: Analysis of Applicability of Companies Act, 2013
on Indian Subsidiary of Companies Incorporated Outside India
INDEX

3. AEG Group's Indian subsidiary to sell its manufacturing facility to Japan's Toshiba
Mitsubishi-Electric
AEG Power Solutions Group, the sole subsidiary of the holding company 3W Power S.A.,
headquartered in Zwanenburg in the Netherlands and is the global provider of power electronics
systems and solutions. The Group has sold recently its Bangalore-based subsidiary AEG Power
Solutions India Pvt Ltd (AEG PS) to Japan's Toshiba Mitsubishi-Electric Industrial Systems
Corporation (TMEIC). TMEIC was formed from the merger of the industrial systems departments
of Toshiba Corporation and Mitsubishi Electric Corporation. The firm manufactures and sells
variable frequency drives, motors and advanced automation systems for a range of industrial
applications. This transaction comes in the wake of AEG PS's restructuring plans and increased
focus on its core areas of competitive strength. AEG PS is happy to have Toshiba as its partner that
will continue to provide to its customers an equally high standard of capability and expertise as
well as give a long and prosperous future for the well deserving Indian colleagues.
India's Coromandel to form JV with Japan's Yanmar, Mitsui
India's Coromandel International Limited, the crop protection products manufacturer is forming a
joint venture with two Japanese firms namely, Yanmar Co Ltd and Mitsui & Co Asia Pacific Pte
Ltd, to manufacture rice transplanters and harvesters. Coromandel International and Yanmar each
will own 40 per cent stake in the JV, and Mitsui will hold the remaining 20 per cent stake. The
proposed project is estimated to have a capital cost of Rs 40 crore. Coromandel will provide an
edge to the deal through knowledge of farming practices, connect with the farmers to market the
equipment and also use its relationship with promoter Murugappa Group’s engineering firm to set
up the manufacturing base and to aboriginal the production of the equipment over a period of time.
Indo-Japan Trade & Investment Highlights

4. The JV agreement also provides possibility of engaging in sales and after sales services of other
Yanmar brand machinery with mutual agreement of parties. Coromandel’s managing director, Mr.
Kapil Mehan is hoping that the development of cost competitive agriculture manufacturing
capability will allow the company to further expand its farm mechanisation services through its
retail outlets.
India's Stumpp, Schuele & Somappa Springs spins coil spring business into JV with Japan's
Mitsubishi Steel
India-based automotive springs manufacturer Stump, Schuele & Somappa Springs Pvt Ltd (SSSS)
has spun off its coil spring business into a joint venture with Japanese firm Mitsubishi Steel Mfg
Co Ltd (MSM). Established in 1960, SSSS is a part of MG Brothers Group, which is engaged in
varied businesses such as transportation & auto dealerships, agriculture and real estate etc. MSM
is engaged in the manufacturing and sale of steel products and is operating in five business
segments including specialty steel products, spring, fabricated materials, equipment & device
segment and others. The JV firm is in the process of manufacturing coil springs and stabiliser bars.
For manufacturing construction machinery recoil springs, the Indian firm has formed a separate
JV with MSM. The manufacturing facility will be based out of Chennai, India.
Japan's Suntory, India's Tilaknagar in race to buy Imperial Spirits
Suntory, the leading beverages maker of Japan and India's Tilaknagar Industries, based in Mumbai,
are competing to purchase their rival Imperial Spirits, which was put on sale by private equity
fund, Lighthouse Funds. The development comes after the world's biggest spirits maker Diageo
purchased India's largest liquor maker United Spirits.
Meidensha Corp buys 23% stake in Prime Electric
Meidensha Corporation, the Japan-based capital goods manufacturer, has signed a joint venture
agreement with India’s power equipment manufacturer, Prime Electric Ltd for acquiring a minority
stake of 23 per cent in the Indian company. Prime Electric is a part of diversified business Prime
Group of Companies having manufacturing facility at Hyderabad, Andhra Pradesh and is one of

5. the leading manufacturers in the area of large capacity power transformers.The company has a
broad customer base in India and is looking to expand its operations to reach markets in other
countries. Meidensha Corp was founded in year 1897 and is engaged in manufacturing and selling
capital goods including generators, substation equipment, electronic equipment, and information
equipment in Japan and globally.
TCS, Mitsubishi to create new Japan IT services firm
Tata Consultancy Services (TCS), India's largest outsourcing firm and Japan's Mitsubishi Corp are
teaming up to create a Japanese software services provider with an estimated annual revenues of
$600 million. Under the agreement, TCS Japan, Nippon TCS Solution Center and IT Frontier
Corp will merge to create the provider. This transaction signifies TCS's serious commitment to the
Japan market. Through this deal, TCS will have a strong local presence and full range of global
capabilities to serve the Japanese corporations effectively and to contribute to its growth in Japan's
market and Mitsubushi will effectively complement TCS's deep domain knowledge, technology
expertise and strong execution track record. Initially, TCS Japan will hold a 51 percent stake in the
new company and the rest 49 per cent will be held by Mitsubishi Corp. Under the agreement, TCS
Japan will have an option to raise its holding in the future.
Japan's Rakuten planning acquisitions to enter India
Rakuten, the membership-based Internet services company of Japan is planning to enter the Indian
market and is expected to launch its services in India within a period of about eight months. Its
been said that the company is contemplating its options of setting up operations in travel and
hospitality sector. It is also considering an acquisition for setting up back-end solutions such as
logistics. Rakuten will be competing against all travel services websites in India such as
MakeMyTrip ,Yatra, Cleartrip and GoIbibo that have started pushing hospitality related services
to increase revenues. Rakuten will be competing against Indian companies in the e-commerce
space such as Flipkart and Snapdeal and foreign companies such as Amazon and eBay. Last year,
the company had also launched its eBook reader Kobo in India in partnership with Crossword
bookstores, WHSmith and Croma chain of electronic stores.

6. Omron Automation opens 1st automation centre in India
Japan's Omron Automation belonging to Omron Corporation group has opened its automation
centre in Mumbai, India, which is the first automation centre in India, and the fifth in the world.
On the inaugration of the plant, Sameer Gandhi, managing director of Omron Automation, India
talked about the industrial automation sector and the significance of providing a hands-on exposure
to the associates to help them achieve what they have not been able to do so far through their
manufacturing establishments.Through this initiative, the company is confident of achieving
relevant traction in many industries. The centre aims at showing Omron’s expertise in the
technology in order to enable the customers to test their ideas, experience and understand how the
company may become more competitive in their respective fields in the industrial automation
sector. The centre would be hosting more than ten experts as software, hardware and application
specialists.
India, Japan meeting on amphibious aircraft deal in Tokyo
India and Japan are set to discuss procurement of the Japanese US-2 amphibious aircraft by India
during the working-level meeting between the two countries in Japan. Japan had recently removed
its self-imposed ban on exporting defence equipments. For some time, India and Japan have been
discussing the sale of these aircrafts. On the proposed sale of the amphibious aircraft, the first
meeting of the Joint Working Group was held in December in India. These aircrafts are required
by the Indian Navy to look after its island territories in Andaman and Nicobar and Lakshadweep.
As per Japan's changed policy on sale of defence equipments, it will prohibit the export of weapons
to the countries whcih are involved in conflicts and exports will be permitted only if they serve
the purpose of contributing to international cooperation and its security interests.
Nissan India to scale up Chennai plant capacity
Nissan Motor India Private, wholly owned subsidiary of Japan's Nissan Motor, will set up
additional manufacturing capacity at its Chennai plant in furtherance of its plans to increase the
localisation in Indian market. The plant, which Nissan had set up in India along with with Renault,

7. has a capacity of manufacturing about 4,00,000 units and now the company is adding another
80,000 units to its capacity this year. As the company has been able to utilize the current capacity
to its maximum, the capacity addition is needed in view of the growing domestic demand. No new
investment would be required for the proposed capacity enhancement, but, an additional shift will
be added by the company. Nissan and Renault together have invested about Rs 4,500 crore1
in
India so far.
Japan's LINE Corporation in talks with Indian telcos for collaborations
Japan's LINE Corporation is holding talks with several Indian telecom service providers to forge
collaborations, including in carrier billing and special bundled data packages. LINE seeks to
promote its instant messaging and voice app to compete with its rivals such as WhatsApp, Viber
and WeChat.n LINE was launched in India in July, 2013, when it has 18 million of its 400 million
users worldwide. Besides partnerships with telcos, LINE is dedicately focusing on content
partnerships in India for paid stickers and official brand accounts.
Daiichi and Docomo exit, but India remains a hot market for the Japanese
Japan's Daiichi Sankyo and NTT Docomo decided to exit their Indian investments raising concerns
over regulatory hassles in India. Despite, the Japanese investors are willing to tap into India's
consumer growth story and a lot more merger & acquisition (M&A) deals are expected to be seen
in near future. The disinvestment by the two Japanese majors tends to give an impression that the
Japanese investors are being cautious on their India plans, however, when one observes the deals
carefully, they are signing in sectors ranging from finance to food & beverages. The former
president of Lupin Ltd. and advisor to many Japanese drug companies, Satish Khanna has clarified
that Daiichi Sankyo's or Docomo's exit should not be interpreted as a lack of Japanese interest in
India as the Japanese are very much keen to actively participate in the growing Indian market's
multiple industries. Not long ago, Mitsui Global Investments invested in a start-up launched by
Arumugam Mahendran and Netprice.com is looking to tap into India's payment solution space
1
1 Crore = 10 Million

8. with its investment in CitrusPay, an Indian mobile payments solutions provider. Also, Suntory
Holdings, has been looking to buy out an Indian alcohol manufacturer. Apart from these, Tata
Consultancy Services too has joined hands with Japan's Mitsubishi Corp to merge their subsidiaries
and form a new IT services company. At present, more than 1,000 Japanese companies are present
in India and a few of their Indian subsidiaries have become market leaders in their respective
sectors.

9. DEEMED PUBLIC COMPANY: Analysis of Applicability of Companies Act, 2013 on
Indian Subsidiary of Companies Incorporated Outside India
The much awaited Companies Act, 2013 ('New Act') and Rules thereunder have finally been
notified by the Ministry of Corporate Affairs, Government of India, to replace major parts of the
Companies Act, 1956 ('Old Act'). With the enactment of the New Act, the corporate legal
environment in India has acquired a more stringent face. It demands few cumbersome compliances
and creates ambiguity in certain areas but its virtues outweigh the problems it brings. As for foreign
investors, the New Act has brought immense relief.
If a company incorporated outside India intends to carry on its business in India by incorporating
a subsidiary company in the country, then naturally its subsidiary company will have to comply
with the Indian company law in addition to other local laws. As per the Old as well as New Act, a
private subsidiary of a public company is deemed as a public company and is therefore required
to comply with all the provisions applicable to public companies under the Indian company law.
It implies that practically, an Indian public company is not allowed to do business through a private
subsidiary and the very inclination of doing business in form of a private company originates from
the fact that the Indian company law grants various exemptions and privileges to private companies
pertaining to disclosure requirements and other compliances. Ordinarily, the Indian company law
is applicable only on the companies incorporated in India, including companies incorporated as
foreign companies i.e. the companies having a place of business in India.
However, under the Old Act, Indian subsidiaries of the foreign companies were also deemed to be
public companies if their holding companies would satisfy the criteria of being a public company
in India under the Old Act. The New Act seeks to change that position by giving discretion to the
foreign companies as to the form and type of subsidiary they want to incorporate in India.
Knowledge Center

10. Therefore, the foreign companies, even if compliant with the public company criteria under the
Indian laws, are free to incorporate their Indian subsidiaries in the form of a private company.
Under the Old Act:
Section 3(1)(iv) specifically provided that a private subsidiary of a public company will be deemed
as a public company for all purposes of company law. It is indisputable that the Indian company
law is applicable to the companies formed and registered under the Old Act and any previous act
and will therefore not apply to a company incorporated outside India. However, Section 4(7) of
the Old Act was the enabling provision in this respect that defines how and when a foreign
company may be considered to be a public company for its subsidiary in India. It provides that an
Indian subsidiary of a foreign company will be deemed to be a public company only if such foreign
holding company would be a public company if incorporated in India. The test is to ascertain
whether such foreign company, as per its charter documents or AoA, will be a public company in
India under the companies act for the time being in force i.e. whether or not its charter contains
the restrictions imposed by the law regarding right to transfer shares, restrictions on number of
shares, invitation to public to subscribe to share, debentures, deposits, as provided under law.
Therefore, if the foreign company had the forenamed restrictions in its AoA, it was implied that
such company if had been incorporated in India with the same charter documents, will have the
status of a public company and hence, so will its subsidiary in India.
Under the New Act:
Like Section 3(1)(iv) of the Old Act, Section 2(71) of the New Act also provides that a private
subsidiary of a public company will be deemed as a public company. Interestingly, unlike Section
4(7) the Old Act, the New Act does not lay down any test or criteria to determine the status
(public/private) of a company incorporated outside India. Therefore, in the absence of any
corresponding provision of Section 4(7) of the Old Act, applicability of Section 2(71) could not
be extended to the companies incorporated outside India and thus, such companies cannot be
considered as a public company in India, which implies that now a subsidiary of a company
incorporated outside India will not be deemed as a public company for the purpose of the New
Act.

11. Going into the history of the New Act, it started with the Concept Paper notified by the Ministry
of Company Affairs in 2004, as well as the J. J. Irani Committee Report that also made a reference
to this question. Concept Paper had provided a draft bill which provided for the definition of 'public
company' which was in line with the definition under the Old Act. The definition provided that
any company which is a subsidiary of a public company or a body corporate incorporated outside
India, if incorporated in India, to be a public company within the meaning of this Act, shall be a
public company. However, the draft bills did not include any reference to the definition as
discussed above.
Conclusion:
The New Act does not specifically exempt the subsidiaries of the foreign companies from the
applicability of the provisions of deemed public company. Similarly, the New Act doesn’t have
any enabling provision to extend the applicability of provisions governing a deemed public
company under section 2(71). Consequently, the New Act enables a foreign company to decide
the form of its subsidiaries in India regardless of the form and structure of such foreign company.
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12. CONTACT US
PANKAJ SINGLA
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