Indo-Japan Trade & Investment Highlights Knowledge Centre: Corporate Social Responsibility (CSR)

1. Indo-Japan Trade & Investment
Bulletin
February Issue
Japan Desk, Corporate Professionals
2013

2. INDEX
Indo-Japan Trade & Investment Highlights
India and Japan to Set-Up Information and Communication Technology Working Group
to Boost Bilateral Trade
Suntory Explores Acquisition Route to Tap Indian Liquor Market
Japan Keen to Help India Achieve its Target of Eightfold Expansion in Solar-Power
Output
Nissan Pushes Aggressively to Double Sales in India
Japanese Giant YKK AP Buys Aluminium Extrusions Business of Bhoruka Aluminium
Japan Seeks Relaxation of Banking Norms for Foreign Banks Operating in India
Nissan to Set up a 1,700 Crore Plant on the Outskirts of Chennai
Japan’s All Nippon Airways to be the Next Gateway Carrier
Japanese Financial and Retail Chain 7-Eleven is Considering Entering the Indian White
Label ATM Space
Japanese Auto-Component Makers to Enter India through Set-Up in Tamil Nadu
Japan’s KYB Corporation acquires 50% stake in Conmat System Private Limited
Japanese Manga for India
Knowledge Centre
Corporate Social Responsibility

3. Indo-Japan Trade & Investment Highlights
India and Japan to Set-Up Information and Communication Technology Working Group
to Boost Bilateral Trade
India and Japan have agreed to set up working group of Information and Communication
Technology (ICT) in order to provide a boost to the bilateral trade between the two nations.
Indian Telecom and IT Minister Mr. Kapil Sibal put forward the proposal during his visit to
Japan to encourage Japanese investment in ICT Sector in India.
A Joint Working Group between Ministry of Economy Trade and Industry (METI) of Japan and
Department of Electronics and Information Technology (DEITY) of India will be set up. The
Working Group is likely to submit their report in three months time.
India will also be forming a special Japan desk to focus on Industrial and bilateral relations
between the two nations in the areas of ICT and to facilitate the collaboration and coordination
between companies from both the countries.
Suntory Explores Acquisition Route to Tap Indian Liquor Market
Japanese Liquor major, Suntory Liquors Ltd. is said to be in talks with John Distilleries (JDL) to
pick-up stake to enter Indian liquor market. JDL is said to be in the process of raising funds in
order to fund their expansion plans in India and abroad.
Suntory has been exploring its options in India to set-up presence in the lucrative Indian
alcoholic drinks market and may have found its local partner in JDL. Suntory had announced its
India entry by acquisition of controlling stake in Narang Connect to tap the non-alcoholic drinks
market in India last year.
Japan Keen to Help India Achieve its Target of Eightfold Expansion in Solar-Power
Output
Japanese companies are looking at exploiting the opportunities in the clean energy market in
India as Indian Government has offered a range of tax benefits to encourage increased
investment. India has set a target of 9,000 megawatts of grid-connected solar plants by 2017,
which is more than eight times the current capacity.

4. Nissan Pushes Aggressively to Double Sales in India
Japanese auto major Nissan has set out an aggressive strategy for India to push its sale volume to
double by next year. Nissan expects to close the current year with sale of 50,000 cars and has a
market share of 1.6%. The company is optimistic about pushing aggressively in the Indian
market to gain a share of 10% by 2017. Nissan’s plant in Tamil Nadu has a capacity of
manufacturing 500,000 units a year that it operates jointly with Renault. With an estimate
production of 300,000 units this year, company exports most of the manufactured units to other
countries.
Japanese Giant YKK AP Buys Aluminium Extrusions Business of Bhoruka Aluminium
YKK AP has bought the unit of Bhoruka Aluminium Ltd. (BAL), India’s second largest
commercial extrusions firm, in a slump sale. This has come in the wake of BAL’s efforts to pay
debts after it became a Non Performing Asset for its lender State Bank of India. YKK Group, a
significant player in the global aluminium products will shell out Rs. 120 Crores to buy out the
unit.
Japan Seeks Relaxation of Banking Norms for Foreign Banks Operating in India
Japan has formally approached the Finance Ministry and the Reserve Bank of India looking for
relaxation in guidelines for its banks operating in India. The Japanese banks Mizuho Corporate
Bank Ltd. and The Bank of Tokyo- Mitsubishi UFJ Ltd have branches in India, while Sumitomo
Mitsui Banking Corp has a representative office in India. The present norms require the foreign
banks to first open branches in non-metro cities and then shift to urban centers apart from
allocating 32% of their lending to the priority sector consisting of Agriculture, Small scale
Industries, Export Credit, Education loans, etc.
The relaxation sought will target its dwindling profit margins as their main clientele consists of
large corporate entities and not businesses engaged in rural activities.
Nissan to Set up a 1,700 Crore Plant on the Outskirts of Chennai
Japanese automaker Nissan plans to set up a factory producing the Datsun range of low cost
small cars, most likely near the Renault- Nissan factory at Oragadam. This is in an effort to
revive the company’s brand which has the potential to contribute to half of its sales.

5. Japan’s All Nippon Airways to be the Next Gateway Carrier
Japan’s ANA has made plans to become a gateway to US for Indian passengers i.e. US bound
passengers will now be able to reach their destination via the Japanese transit hub – Tokyo.
Apart from daily flights from Delhi and Mumbai, the carrier plans to increase the capacity for
Mumbai by threefold. Not only this, it even plans to fly to Chennai four times a week and to
Bangalore thrice a week.
Japanese Financial and Retail Chain 7-Eleven is Considering Entering the Indian White
Label ATM Space
White label ATMs are those Automatic Teller Machines which are set up, owned and operated
by Non Banking Companies. The sector has been opened up for Non-banking entities in India by
the apex bank to increase penetration of alternative payment channels in semi-urban and rural
areas.
The Japanese Financial and retail chain player, 7-Eleven, plans to enter the country through its
Japanese banking unit “Seven Bank” which has an ATM business arm.
Japanese Auto-Component Makers to Enter India through Set-Up in Tamil Nadu
A delegation of 46 Japanese MSMEs with more than 40 being from auto component sector are
on a spree to explore investment opportunities in Tamil Nadu. This comes after large Japanese
Automobile companies have taken the country by a storm. Tamil Nadu is home to over 300
Japanese companies who would benefit from the entry of these Tier-2 component makers in this
Indian state.
Japan’s KYB Corporation acquires 50% stake in Conmat System Private Limited
The Japanese construction equipment manufacturer has acquired the stake in Conmat Systems
Private Limited for Rs. 100 Cr. KYB will have a representative on the Company’s Board while
the existing management of Conmat will continue to operate. The Company’s name will
however be changed to KYB- Conmat Private Limited.
Over the next 3 years, Conmat, a company having its presence in various segments like
construction equipments, material handling equipments, storage solutions and Oil & Gas
pipeline, plans to set up a new manufacturing unit and make an investment of Rs. 100 Crore.

6. Japanese Manga for India
American Company Vertical Inc. announced its plans to launch Japanese Manga in the Indian
Market at the 3rd Annual Indian Comic Con held in New Delhi. Japanese Manga has been
gaining popularity in India and is made available in the country by online book stores through
imports from other countries. The formal launch of Manga is likely to decrease the cost
significantly and will result in better knowledge about Japanese form of comic art in the
subcontinent.

7. Knowledge Center
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility is now accepted as a means to achieve sustainable
development of an organization. Hence, it needs to be accepted as an organizational objective.
The Companies Bill, 2012 will make Indian companies to consciously work towards that
objective, as it requires a prescribed class of companies to spend a portion of their profits on
CSR activities.
Businesses can no longer limit themselves to using resources to
engage in activities that increase their profits. They have to be
socially responsible corporate citizens and also contribute to
the social good. Corporate Social Responsibility (CSR) is
about integrating economic, environmental and social
objectives with a company’s operations and growth. Many
consider CSR philanthropy, but that is a limited definition. An
organization can accomplish sustainable development if CSR
becomes an integral part of its business process.
CSR impacts almost every area of operations: governance and ethics; employee hiring, providing
opportunity; stakeholders benefit sharing and energy usage and environment protection. The
Companies Bill, 2012 intends to inculcate the philosophy of CSR among Indian companies.
STIPULATIONS OF THE COMPANIES BILL, 2012
Every company with net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or
more or a net profit of Rs 5 crore or more during any financial year to constitute a CSR
Committee of the Board consisting of three or more directors, of which at least one
director shall be an independent director
The Board’s report to disclose the composition of the CSR Committee
The main functions of the CSR Committee are to:

8. (a) Formulate and recommend to the board, a CSR policy indicating the activity or activities
to be undertaken by the company as specified in Schedule VII of the Act;
(b) Recommend the amount to be spent on these activities; and
(c) Monitor the company’s CSR policy periodically.
After the CSR Committee makes it recommendations, Board of the company shall approve
the CSR Policy and disclose contents of such policy in its report and also place it on the
company’s website. Further, details about the policy developed and implemented by the
company on CSR initiatives during the year to be included in the Board’s report every year.
Board to ensure that the activities listed in the CSR Policy are undertaken by the company
Board to ensure that at least 2% of average net profits of the company in the three
immediately preceding financial years are spent in every financial year on such activity.
Preference to be given to the local area and areas around the company operates for CSR
spending.
If a company fails to provide or spend such amount, Board to specify reasons in its report
for that failure
Companies required to comply with CSR shall give additional Information by way of notes
to the Statement of Profit and Loss about the aggregate expenditure on CSR activities.
Schedule VII of the Companies Bill 2012 prescribes activities that may be included by
companies in their CSR policies
 Eradicating extreme hunger and poverty;
 Promotion of education;
 Promoting gender equality and empowering women;
 Reducing child mortality and improving maternal health;
 Combating human immunodeficiency virus, acquired immune deficiency syndrome,
malaria and other diseases;
 Ensuring environmental sustainability;
 Employment enhancing vocational skills;
 Social business projects;
 Contribution to the Prime Minister's National Relief Fund or any other fund set up by
the central government or the state governments for socioeconomic development and

9. relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other
backward classes, minorities and women; and
 Other matters as may be prescribed.
EXISTING ACT:
There are no mandatory provisions in The Companies Act, 1956 on CSR
IMPACT/ INDUSTRY RESPONSE
With CSR spending becoming mandatory for prescribed class of companies, there is bound to be
increased engagement of companies with social and development projects. So far, there were
only voluntary guidelines for companies to follow.
The rationale for CSR activity is that corporates earn their profit by exploiting different
resources of the society, and so a portion of the benefit derived by them should be channelled
for the betterment of society.
Though compulsory CSR spending may seem burdensome for some class of companies, it
will create of a sense of responsibility among corporates, especially when they see benefits in
the long term.
Children, women, uneducated, and unemployed would be among the beneficiaries as CSR
activities may be focused on them.
The intention of policy makers is quite clear - to report business community’s contribution
for fulfilment of social, environmental and economic responsibilities. While contribution to
the local community is a good objective, businesses should choose social, environmental and
economic activities that contribute to society at large.
CSR activities will also help improve the image of a company within the society as one that
cares for the community.
Significantly, there is no penalty for defaulting on CSR norms. Only an explanation is to be
given by the board in its report for such non-compliance. So, it seems there is no real
coercive factor.
The Government has adopted a “Gandhi wad” with the provision - either contribute to
society or inform to society why you are not contributing.
Existing CSR Activities of some companies

10. Company Name Major CSR Initiatives
ITC Ltd e-Choupal, social & farm forestry, watershed development,
women's empowerment, livestock development, primary education
Infosys Employees take up social causes like education, rural rehabilitation
and inclusive growth. energy conservation, water sustainability,
afforestation, waste management, awareness on carbon footprint
Jubilant Work Basic healthcare facilities, supporting government rural primary
Sciences education system, developing resource pool through vocational
training programmes
Reliance Health, education, infrastructure development (drinking water,
Industries Ltd improving village infrastructure, construction of schools etc.),
environment (effluent treatment, tree plantation, treatment of
hazardous waste), relief and assistance in the event of a natural
disaster, and miscellaneous activities such as contribution to other
social development organizations
Illustration of Expected contribution for CSR after the CSR provisions come into force:
No. Name of the companies Average Profits Proposed
contribution in CSR
(of the FY 2009- (2% of the Average
10, 2010-11, Profits)
2011-12)
(Amount in Rs.
(Amount in Rs.
millions)
millions)
1. GAIL (INDIA) 34,516.03 690.32
LIMITED
2. HINDUSTAN 23,998.00 479.96
UNILEVER LTD
3. Infosys 69,053.33 1,381.07
4. Larsen & Toubro Ltd 42,633.03 852.66
5. NTPC Ltd 90,181.73 1,803.63

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