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January 15, 1998


Government okays CA's subsidiary plan

Email this story to a friend. The government has approved the proposal of Computer Associates International Inc of the US to set up a wholly owned subsidiary in India.

The subsidiary would market its software products in India and offer support services to its Indian clientele.

The initial investment for the marketing services is expected to be Rs 26.25 million. CA, however, says it will sink in around Rs 4 billion over the next
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five years in the country.

The new investments would go into establishing a joint venture technology centre and selling globally, software developed by companies housed in the centre.

CA also plans to participate in equity joint ventures with at least a dozen new companies over the next two to three years.

Keeping this in view, the Foreign Investment Promotion Board has cleared the proposal, subject to the condition that CA would obtain specific approval of the government for setting up such joint ventures or for making downstream investments and would conform to the norms regarding venture capital funds.

Earlier, the Department of Electronics had issued a no-objection certificate to the proposal, adding that the FIPB may consider the proposal, keeping in view that the proposed business relates to marketing of software.

The FIPB, which met last month, concluded that software marketing is not normal trading, especially marketing by a company of the stature of Computer Associates, which is the third largest software company in the world.

Moreover, software marketing covers a high-technology product and in India the law allows import of software. Hence the FIPB decided to clear the project and recommended it to the union industry minister for his final approval, the sources said.

Earlier, replying to clarifications sought by the government, CA said that though the initial investment proposed was Rs 26.3 million, it was meant only for setting up the marketing venture.

The company clarified that it proposed to invest around $100 million over the next five years, "primarily to add two new elements to its Indian business, in addition to the marketing operations''.

The sources added that CA further proposed to establish a joint venture technology centre, which would come up in Calcutta. CA has entered into a 51:49 joint venture with TCG Software Services, an affiliate of TCG, the New York based investment management firm, for setting up the high-technology centre with an initial investment of $5 million.

This centre would provide full-time employment to over 300 Indian developers and would include child-care centres, schooling and family accommodation.

According to them, the software products developed in the centre would be used as value-addition to CA's technology solutions and would also be exported to support CA's offshore clients. They added that CA would also support the start-up of small technology companies through its equity participation.

These companies would be located in the Calcutta technology centre and would provide them with low-cost computing facilities to assist commencement of their operations.

It is learnt that products developed by these companies may later be distributed worldwide, either through CA's worldwide distribution network or through independent channels.

- Compiled from the Indian media

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