Switzerland-based Holcim Group is the latest to join the bandwagon of multinational companies (MNCs) quitting India due to macro-economic and regulatory concerns, and to focus on their core businesses.

Holcim, which sold its India ventures – Ambuja Cements and ACC for $10.50 billion – said its exit was to focus on green revenues as it intends to reduce exposure to the carbon-intensive cement sector and increase environmental, social and corporate governance (ESG) credentials. The firm has also exited cement assets in countries such as Russia, Brazil, Sri Lanka, Malaysia and Northern Ireland.

The long list of companies that quit India in the past included Cairn Energy, Hutchison Telecommunications International, Docomo, Lafarge, Carrefour, Daiichi Sankyo and Henkel, while foreign banks such as Citi, Royal Bank of Scotland and Barclays are focusing completely on wholesale banking in the country. In December 2021, Commerce and Industry Minister Piyush Goyal informed the Lok Sabha that between 2014 and November 2021, 2,783 foreign companies and their subsidiaries closed operations in India.

“A lot of these exits are guided by macro-economic factors globally. Regulatory issues that affected some of the investments in the past are no longer an issue. Regulators have welcomed them, assisted them and when they liked they have exited as well. Many of these exits are sector-specific and are also influenced by past two years of epidemic-related slowdown,” Manoj Kumar, founder and managing partner of Delhi-based law firm Hammurabi and Solomon, said.

In the last 10 years, several companies such as Gruppo SES and Dragados of Spain, and Leighten Construction from Australia have explored investment options, but did not proceed any further. Companies such as GE and Bombardier, apart from selling products, have also invested in many European countries, but not in India.

According to Manish Agarwal, former PwC lead on Infrastructure, and co-founder of AskHow India.org (an organisation that simplifies complex public policy debates for the general public), although foreign direct investment (FDI) is still coming to India, strategic investors have stayed away.

“India needs to ensure proper project preparation timelines for public-private projects, provide balanced risk sharing guidelines, and contracts should be enforced properly,” Agarwal added.

As many as five automobile MNCs – Ford India, Harley Davidson, UM & Lohia, Man Trucks and General Motors – exited India during the past five years, which apart from erosion of dealer investments worth Rs 2,485 crore, also resulted in nearly 64,000 job losses.

“Some of the auto companies had originally set up businesses in India, thinking the country would be a dump yard for their products that were not selling in global markets. At that time, Indian companies were not making products that could compete with the quality of these MNCs. While most of these foreign companies did not keep Indian conditions or customers in mind, slowly and steadily domestic firms also started making quality products,” Vinkesh Gulati, president at Federation of Automobile Dealers Associations of India (FADA) said.

“There were no regulatory or political concerns that would have hurt them. The move has hurt both dealers and customers as there are no services for the products they have sold in the country, and this has also resulted in huge job losses too,” he added.

With domestic markets maturing and government initiatives such as ‘Make in India’ and ‘AatmaNirbharBharat Abhiyan’ gaining ground, India is increasingly becoming a difficult market for MNCs.

“Before making a strategic acquisition or setting up an India vertical, it is imperative that MNCs gain a sound understanding of the local regulatory and operational aspects of the industry they operate in. Hence, they should look at partnering with domestic players and understand the environment better, get the right local talent and then potentially take sole control,” Shivam Bajaj, founder and chief executive officer at private equity and M&A advisory firm Avener Capital said.

The exits also come at a time when the Centre and various state governments were rolling out red carpets, with sops such as tax holidays, for MNCs who are looking to shift their base from a pandemic-battered China. According to a Parliamentary Standing Committee report tabled in February 2021, for companies shifting out of China, India falls behind countries such as Vietnam, Taiwan and Thailand, as preferred destinations.