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Business

Indian companies eye enormous growth potential

MUMBAI -- Indian companies are ramping up investments in Africa, eyeing growth opportunities and solidifying their footholds on the continent. 

     Indian consumer products maker Godrej Consumer Products recently announced that it had raised its stake in Darling Group's hair extension businesses in South Africa and Mozambique to 90% from 51%.

     In January, Godrej acquired Frika Hair, a major company in the hair extensions business in South Africa. The acquisition reflects the company's strategy to raise its profile in Africa, a senior executive of Godrej said. The Indian company is seeking to gain ground in Southeast Asian markets, but is also aiming to tap potentially huge demand in Africa at the same time.

     Similarly, Indian paint maker Asian Paints has decided to buy Ethiopia-based Kadisco Paint and Adhesive Industry. Asian Paints will spend $18.95 million to buy a 51% share in the company.

     Africa is a relatively easy place to invest for Indian businesses. India has had trade relations with African nations for centuries, and a large number of overseas Indians have lived on the continent for decades. An estimated 2.5 million Indians and their descendants reside mainly in East Africa, and quite a few of them are successful in business. They often act as go-betweens and help broker deals between Indian and African companies. And they command significant purchasing power in African markets.

     Meanwhile, India's major media company Zee Entertainment Enterprises launched in early February a new TV channel in South Africa to broadcast Indian programs, including Bollywood movies. The move represents greater cultural ties between the two regions.

     Another factor that eases entry into the African market is that per capital gross domestic product is more or less at the same levels in India and African countries. India's GDP has surpassed $1,500 per capita, while those of many African countries stand at between $1,000 and $2,000. Since Indian and African consumers have similar levels of purchasing power, Indian businesses find it easy to pitch their products and services directly to African consumers.

     As such, Indian motorcycle manufacturer Hero MotoCorp is boosting its exports to African markets. Hero has been manufacturing bikes locally through a partnership with an African company.

     India's largest mobile phone carrier, Bharti Airtel, and leading pharmaceutical company Cipla have also established footholds in Africa through acquisitions.

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