City Spotlight: Investing in India’s Coimbatore

By Dezan Shira & Associates
Editor: Kabir Narang

Coimbatore is a city located in the southern Indian state of Tamil Nadu. The highest revenue-yielding district after the state’s capital city, Chennai, its massive productive potential makes it one of India’s fastest growing metros. Coimbatore also enjoys the nickname ‘Manchester of South India’ as it is surrounded by cotton fields that feed into a flourishing textile industry. Yet, the city has a diversified economy, catering to the IT industry through a skilled labor pool and special economic zones (SEZs) that have attracted leading IT companies and technology service providers.

Additionally, Coimbatore is an important and renowned manufacturing center, producing specialized products intrinsic to the region, such as wet grinders. The city also produces auto components and manufactured the first diesel engine in the country. At least half of India’s motors and pumps come from the region lending it the name, the ‘Pump City’. Apart from being a major exporter of its manufactures, Coimbatore also exports jewelry, poultry, and software. Important trade associations such as the Coimbatore District Small Scale Industries Association (CODISSIA), Coimbatore Industrial Infrastructure Association (COINDIA), South India Textile Research Association (SITRA), and Coimbatore Jewelry Manufacturers’ Association (COJEWEL) regularly organize trade fairs and ensure their representative industries comply with the established standards.

RELATED: Pre-Investment and Entry Strategy Advisory by Dezan Shira & Associates

A Fast Developing Tier-II City

Businesses interested in investing or relocating to Coimbatore may also note the following –

• The revenue growth in Coimbatore is 65 percent – more than twice the all-India revenue growth rate of 30 percent.
• Coimbatore was ranked the best emerging city in India by India Today in the 2014 annual Indian city survey.
• It is ranked 4th among Indian cities in terms of investment climate.
• It is ranked 17th among the top global outsourcing cities by strategic advisory firm Tholons.

Important Sectors

Textiles:

The decline of the cotton industry in India’s financial capital Mumbai due to increasing urbanization has benefited Coimbatore. Coimbatore has more than 17 percent of India’s textile mills. It also has several textile research institutes, namely, the Central Institute for Cotton Research (CICR) – Southern Regional station, South Indian Textiles Research Association (SITRA), and the Sardar Vallabhai Patel International School of Textiles and Management. This is why the central government has proposed the establishment of two Centers of Excellences (COE) – Meditech, a medical textile research center based at SITRA and InduTech, based at the PSG College of Engineering and Technology. The Southern India Mills Association (SIMA) was established in 1933 in the Coimbatore region and governs most of the textile industry in south India.

Manufacturing:

1. Automotive – Auto component makers in Coimbatore include Robert Bosch GmbH, PRICOL Ltd., and Craftsman Automation and Roots Industries. Skilled talent from the technical institutes and engineering colleges in the city supply all the engineers required by the industry. Producers such as domestic Tata Motors and Maruti Udyog source up to 30 percent of their automotive parts from Coimbatore. Many auto component manufacturing companies in the city are original equipment manufacturer (OEM) partners to multinational brands. In fact, Coimbatore has a number of tier-I, II, and III suppliers that cater to the needs of the entire gamut of the automobile industry, ranging from two-wheelers and four-wheelers to commercial vehicles and tractors.
2. Motors and Pumps – Major pump manufacturers like Aquasub engineering, Mahendra Pumps, Suguna pumps, Sharp Industries, Deccan Pumps, CRI Pumps, Texmo Industries, PVG Industries, Flowserve, and Kirloskar Brothers & KSB Pumps have their manufacturing base here. These companies hold a majority share in the Indian pump market and meet nearly 40 percent of the country’s requirements.
3. Wet Grinders – 75 percent of India’s total monthly output of wet grinders are produced in Coimbatore. The city has more than 700 wet grinder manufacturers.
4. Jewelry – Coimbatore is considered an important gold jewelry manufacturing hub in India. It is home to some 3000 jewelry manufacturing companies and to over 40,000 goldsmiths. Retail chains and their manufacturing bases are found in Coimbatore. Jewelry-making equipment is also produced by companies in the city. The city is also a major diamond cutting and polishing center in south India.

IT:

Coimbatore ranks 2^nd after Chennai in terms of producing software. Aditi Technologies, Cognizant Technology Solutions, Wipro, FORD, Robert Bosch GmbH, IBM, Tata Consultancy Services, Tata Elxsi, Dell, CSS Corp, and KGISL all have a presence in the city. In fact, Cognizant’s second biggest hub is located here and employs about 5000 employees. Coimbatore is also known for being a business process outsourcing hub (BPO). Further, it is the largest non-metro city for e-commerce in south India due to the growing online shopping, e-ticketing, and e-billing adaptation in the city. Several e-commerce companies are based out of Coimbatore, including gajgallery.com and Krizda.com.

Food Products, Poultry, and Food Processing:

Coimbatore has some of the oldest flour mills in India. It has a large number of poultry farms and is one of the major producers of chicken eggs and processed meat, amounting to nearly 95 percent of the chicken meat exports from the country. Major companies include Suguna Foods and Shanthi Feeds.

RELATED: India Institutes More FDI Changes, Opening Most Sectors to Automatic Route

Future Smart City

Coimbatore is one of the 100 cities chosen by the Modi government to benefit from the Smart Cities Program. Lake development, non-motorized transport corridors, and setting up of smart poles that have energy-saving street lights, surveillance, and Wi-Fi facilities are all included in the city’s development proposal. Several German companies will be lending their technological expertise, particularly in areas such as sustainable urban mobility, water and waste-water management, renewable energies, and energy efficiency.

Coimbatore as a city has also undertaken many initiatives to increase overall economic efficiency to attract foreign investment and encourage domestic production capability. Some of the important initiatives are as follows:

Corporate Social Responsibility: Coimbatore has a high amount of private sector participation in cleaning up water bodies and planting saplings, along with other waste management efforts. Private sector companies have also built local infrastructure in joint initiatives with residential and social organizations. Businesses are also engaged in the promotion of women’s empowerment, host sports activities for school-children, and oversee the maintenance of the airport, parks and other recreational areas.

Infrastructure Improvement Prospects: The city’s civic body launched the smart city Facebook page and the smart city suggestions tab on their official website to gauge public opinion and assess social welfare needs and expectations. An area based development has been proposed where a 500 acre area in the city will be selected and benefit from retrofitted smart city solutions, redevelopment, and greenfield development. Pollution is to be reduced, better footpaths are to be created, and better public security to be developed.

Sustainable Initiatives: The Indian Institute of Foundrymen has been exploring the option of asking the government to assist in the development of sand reclamation plants. They are efficient enough to reclaim 75-100 percent of sand used in the process. Omega, the manufacturer of thermal reclamation plants is to be approached to initiate the process. Coimbatore has observed similar successful operations nearby in the Belgaum cluster and in Pune.

Observations: In recent times, Coimbatore has emerged as an important base for companies across the manufacturing and services sectors and with good reason. The tier-II city boasts of a diversified economy, wide labor pool, and focused sustainable development objectives, making it an attractive investment destination, particularly in southern India. The Smart City program is sure to further advance the city’s growth prospects.

Managing Your Accounting and Bookkeeping in India
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India.

Using India’s Free Trade & Double Tax Agreements
In this issue of India Briefing magazine, we take a look at the bilateral and multilateral trade agreements that India currently has in place and highlight the deals that are still in negotiation. We analyze the country’s double tax agreements, and conclude by discussing how foreign businesses can establish a presence in Singapore to access both the Indian and ASEAN markets.

Passage to India: Selling to India’s Consumer Market In this issue of India Briefing magazine, we outline the fundamentals of India’s import policies and procedures, as well as provide an introduction to engaging in direct and indirect export, acquiring an Indian company, selling to the government and establishing a local presence in the form of a liaison office, branch office, or wholly owned subsidiary. We conclude by taking a closer look at the strategic potential of joint ventures and the advantages they can provide companies at all stages of market entry and expansion.

• Previous Article India Regulatory Brief: E-Commerce Sector Reacts to Draft GST Bill and Union Cabinet Approves New Mining Policy
• Next Article India’s New Twilight Law: 24/7 Operations for Retailers