Programming beyond three seas – Newspaper Kommersant No. 12 (7457) of 01/24/2023

The Russian IT business began to acquire legal entities and create joint ventures with companies in India to enter the local government order market. The experience of participating in state tenders is often described in the minimum requirements for tender documentation in the country. The growth in demand for accompaniment in connection with doing business in India is confirmed by lawyers. They explain that the creation of a JV will allow immediate access to the existing network of clients and remove bureaucratic barriers, but the cultural aspect in the form of a caste system remains a serious barrier to working in the country, which has not completely disappeared.

The Russian developer of face recognition systems VisionLabs (owned by MTS) bought out their Indian NIS Glonass Private Limited, which was registered in Mumbai in 2011, from the NIS GLONASS operator structure. In India, the company was engaged in urban transport monitoring and control systems. The amount of the transaction is not disclosed. MTS declined to comment.

Restructuring is necessary for VisionLabs in order to qualify for access to government contracts in the country, the company explained to Kommersant: “The Indian government requires companies applying for government contracts to have experience in their implementation. Without this, the company will not meet the requirements of the tender documentation.” According to the forecast of VisionLabs CEO Dmitry Markov, the company’s expected revenue in 2023 in the Indian market is about $1 million (about 68 million rubles).

The requirements for a state tender participant to work in India for at least ten years periodically appear in the documentation, although they are not fixed by law, explains the interlocutor of Kommersant in the IT market. In India, all state contracts are distributed only through competitions, added Valentin Makarov, head of NP Russoft: “Those who have already participated in competitions and who had successful contacts with officials responsible for competitions will have an advantage.”

India has become one of the largest new markets for the export of IT solutions from the Russian Federation after the imposition of sanctions in 2022, according to the Center for Strategic Research (see Kommersant dated September 6, 2022). According to Gartner, total IT spending in India for 2022 grew by 1.9% compared to 2021, to $109.6 billion. The fastest growing segment was software, with an increase of 12.3% year-on-year, to $12, 6 billion. Of the Russian IT companies, there are already present there, in particular, Geoscan, Quantum Communications, Scout, the association of technology companies ITERA, etc. But since 2022, many companies began to go to India “in incognito mode, so as not to fall under sanctions, ”explains a Kommersant source in the industry. Publicly, for example, the MySklad cloud service announced its entry into the Indian market in 2022, investments amounted to $500,000.

Ekaterina Makeeva, a partner at A-PRO law firm, confirms that the growing interest of Russian entrepreneurs in the Indian market is “well noticeable”. She adds that India is of “interest as a place of deployment or doing business among Russian migrants, especially in the field of IT.”

Veronika Litvinenko, head of the legal department at Yustikom, clarifies that the number of requests for legal services has increased in connection with doing business in India and with local companies. “More often we are talking about the creation of joint ventures with the participation of an Indian partner,” adds Ms. Makeeva.

The growing demand for business consulting in India is confirmed by EDB Managing Partner Alexander Zhuravlev: “Many companies from the Russian Federation create joint ventures with different organizational forms and shares to promote and sell their products.” Under such a scheme, he adds, the business gets an already existing network of customers, product promotion schemes and the removal of bureaucratic barriers. Companies create joint ventures with local firms, since this format is strongly supported by the national Made in India program, adds Valentin Makarov: “At the same time, M&A prices may rise due to the risk of secondary sanctions.”

The Indian market still contains a large number of barriers to entry, it is very bureaucratic, Alexander Zhuravlev clarifies: “In addition, there are difficulties both in terms of attracting expats to work and in terms of corporate governance. At the same time, it also leaves its mark on the cultural aspect in the form of a caste system, which has not completely gone into the past. Ms. Litvinenko also notes “a rather high level of corruption in India” and the resulting tightening of requirements for bidders, “while the conditions for participation in Indian public procurement differ depending on the state.”

Timofey Kornev, Anna Zanina, Yulia Silence