Investment Opportunities for Korean Auto companies in Karnataka

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JANUARY 2021

Investment Opportunities for Korean Auto companies in

Karnataka

Introduction document

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Karnataka is a leading investment destination in India

Capital – Bengaluru Startup Capital of India;

Ranked among top startup ecosystems globally

$230 Bn GSDP, a

lmost the size of Vietnam

Economic Overview

1

^st in total exports, among all Indian states

3

^rd highest FDI among all states

Advantage Karnataka

400 out of Fortune 500 companies are in the State

New Delhi

Kolkata

Chennai Ahmedabad

Mumbai

Hyderabad

Bengaluru

KARNATAKA

1

^st

1

^st

1

^st

In R&D

Centers In Renewable

Energy In attracting

investments since 2016

1

^st

In India Innovation Index

4

^th largest technology cluster in the world

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1 2

3 Highly skilled & trained labor workforce; eased labor norms and skilling subsidies

4 Readily available industrial land at strategic locations

5 Well connected to key demand centers and gateways (both domestic & exports) with an efficient logistics network

Multiple financial incentives to create favorable cost economics

Existing strong ecosystem of auto & auto components manufacturing

Key reasons why Karnataka is the most attractive investment

destination

6

Revamped processes to facilitate Ease of Doing Business

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Multiple financial incentives announced in Karnataka's new Industrial Policy 2020-25 to create favorable cost economics for investors

100% reimbursement of stamp duty 100% reimbursement of land conversion fee

1. Subsidy applicable only for the first industry in sub-administrative zones; to encourage investments in taluks where there are no industries with investments above INR 100 Cr and direct employment of 75 persons;

Rs. 7-10 Cr. subsidy to anchor industries¹

0.1% concessional registration charges

Additional incentives can be considered for marquee projects Investment

promotion subsidy upto 2.25% of annual turnover

for 6-10 years with a ceiling of 40-60% Value

of Fixed Assets

Pre-setup charges Capital expenditure Turnover linked

subsidies

New Industrial Policy released in August 2020

1 Auto & Auto

Components is a focus sector for Karnataka

20-25%

of investment provided as

subsidies Highest subsidies benefit in Karnataka

vs. other states

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Karnataka offers the highest incentives

compared to other states in Auto sector

(as reflected in the NPV of subsidies)

AP

KN GJ MH

Rs.195-231 Cr.

TN Rs.155-163 Cr.

Rs.116-136 Cr.

Rs.68-79 Cr.

Rs.37-43 Cr.

-24% to -81%

1. NPV on an investment size of Rs. 1000 Cr ($140 Mn)

Note: Fixed asset turnover considered as 250% and 300%; Source: BCG Analysis

NPV

¹

of Benefits on an investment of Rs. 1000 Cr.

(Rs. Cr)

1

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Karnataka has a strong Auto manufacturing ecosystem, along with strong R&D

2 • 8.5% contribution to the national output in the Automobile sector

• 5 Auto-specific clusters across Karnataka

• Home to 7 major auto OEMs and more than 50 auto component manufacturers

• Home to Tesla Motors in India

• 400 R&D centres across the state

• 1

^st

in NITI Aayog’s India Innovation Index

• Home to Mahindra Reva, India's 1

^st

indigenously built electric car

• Leader in advanced manufacturing (Automation, IoT, Industry 4.0)

Preferred destination for auto investments Strong tech & innovation environment

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Over 10,000 acres of industrial developed land available in/around existing auto manufacturing clusters in the state

3

International Airport Major Port

Mangalore Mumbai

Chennai Auto

component cluster

Auto cluster Industrial

valve cluster

Manufacturing hubs

1 2

3

4 5

6 7

8 9 10

Bengaluru

2 1

3 4 5 6 7 8 9 10

Kolar 191 Ac.

Chikkaballapura 293 Ac.

Belagavi 560 Ac.

Chamrajanagar 805 Ac.

Bellari 439 Ac.

Tumakuru 1,009 Ac.

Dharwad 435 Ac.

Mysuru 457 Ac.

Bengaluru (Rural) 488 Ac.

Yadgir 681 Ac.

Major Developed Industrial Land Banks

11 Dakshin Kannada 349 Ac.

11

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Well connected to key demand centers (South & Central India) and export gateways with efficient logistics network

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1. 3 operational currently and 3 more in the pipeline 2. In terms of value of trade handled

Mumbai

Chennai Hubballi

Mysore

International Airport Major Port Domestic Airport BMEC Corridor

National Highway (Not exhaustive)

Shivamogga

Bellary

Krishnapatnam

2

CBIC Corridor

3

1

1 2 3

Bengaluru(Urban & Rural) Mysore

Dharwad & Belagavi

Bengaluru Belagavi

xx xx – Distance to port Bidar

Gulbarga

Served by 13 major National Highways; 2^nd highest road density among major states in India

Mangalore

Major port at Mangalore + 9 minor ports; 300-400 km access to Chennai, JNPT and Krishnapatnam ports 2 International airports and 6 Domestic airports Bengaluru Airport – 3^rd Largest in India

Power Surplus State with highest installed capacity of renewable energy (18.8 GW) in country; 63% of

installed capacity is renewable

6 ICDs (Inland Container Depots) & 5 CFSs (Container Freight Station) incld. 2^nd largest ICD²in India

Only State in India to have 2 industrial corridors- CBIC (Chennai-Bengaluru) & BMEC (Bengaluru- Mumbai) Bengaluru-Chennai expressway being implemented

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Karnataka, the knowledge capital of the country, provides highly skilled &

trained labor force; along with relaxed labor laws

5 Large skilled & trained talent pool in Karnataka

Institutes of Excellence Indian Institute of Management, Indian Institute of Science, Indian

Institute of Technology etc.

ITIs Public and Pvt.

Industrial Training Institutions Engineering

Colleges

Universities 52

234

1,777

Largest workforce at the intersection of advanced mfg.

building blocks (AI, IoT) and skilled mfg. craftsmanship

20 Mn in age group of 16-35 years creating a favourable demographic dividend

…along with relaxed labor laws

• Provision to avail 'Fixed term employment' to optimize labor capacity to cater to seasonality

• Recent amendments made to facilitate women's work timings in night shifts, between 7 PM to 6 AM

• Overtime limit per quarter increased from 75 to 125 hours with the amendments to the Factories Act

• Among the first few Indian states to introduce and implement labor reforms, ensuring convenience for both employees and employers

• Partnership with Govt. training institutes can be provided, to tailor curriculum as per requirement

• Skilling subsidies can also be considered

…and skilling support from Govt.

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Ease of doing business in Karnataka enhanced by latest 3-year moratorium on approvals, land reforms and transparent one-stop-shop for approvals

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1. 3 years or start of commercial operations, whichever is earlier 2. Between Jan to May 2020 Source: DPIIT, Karnataka Facilitation Act

Transparent & convenient

approval processes for investors

Time-bound grievance handling

Auto renewal system across multiple

departments

Single portal for all approvals & clearances

Facilitation Act amended for improving EODB

approvals relaxed by introducing moratorium

3

years long moratorium period¹

departments covered

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Karnataka Land Reforms Act amended for improving ease of land procurement

Enables direct procurement of land from farmers

50%

of India's investment plans garnered by Karnataka

²

amounting to $15 Bn+

Best of its kind Single Window system being developed by Microsoft

Policy continuity and transparency in incentives disbursal ensured by stable political leadership in Karnataka

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