/ Avoiding Common Pitfalls When Establishing Manufacturing in India

If there is a desire to establish one’s own production site, but not to incur the high start-up costs associated with a greenfield investment (building one’s own facility), then an existing facility can be sought to lease or purchase.

Such a brownfield investment is often done through an acquisition (M&A) of a local business. If this is chosen, the aforementioned location analysis can be expanded to include a partner search and due diligence once a potential partner is found.

There are interesting advantages to a brownfield investment:

– Costs are lower on average due to the use of existing facilities, infrastructure and personnel already employed,
– It allows it to take over existing approvals and permits, saving a lot of work and time.

But there are also things that can work against it and should always be checked carefully before signing any potential agreement:

– In India, production facilities often look “simpler” than in Europe, which does not mean that they produce lower quality as a result. If an acquisition is chosen, however, it must be carefully checked that the location meets European standards.

– It is also important that the site has the proper permits to allow the facility to scale up or expand; you obviously want to avoid the possibility that you would not be able to adapt the facility to new production needs over time.

Therefore, if you choose to make a brownfield investment, it is important that you seek proper advice from a local expert with knowledge of your industry and Indian laws and regulations.