Home ／ Insights on entering the Indian market
2026.03.26
With a population of 1.4 billion and GDP growth of 6-7%, India is one of the world's leading growth markets and an attractive destination for Japanese companies. On the other hand, however, quite a few Japanese companies have suffered bitter setbacks in the Indian market and been forced to withdraw after posting massive losses.
This article analyzes in detail the India exit cases of NTT DoCoMo, Daiichi Sankyo, and Ricoh, three companies representative of corporate Japan, and clarifies each of their causes of failure and the lessons learned. For Japanese food companies now considering entering India, learning from the failures of those who came before should be the shortest path to success.
In 2009, NTT DoCoMo invested about 267 billion yen in India's telecom giant Tata Teleservices (TTSL), acquiring a 26.5% stake. At the time, India's mobile phone market was in a period of rapid growth, with the number of subscribers increasing at a pace of more than 15 million per month. DoCoMo envisioned securing a foothold in this growth market as a pillar of its overseas expansion.
However, DOCOMO's plan collapsed due to several factors. First, price competition in India's mobile market was extremely intense, driving call rates down to among the lowest in the world. Second, in its ruling on the so-called 2G case in February 2012, the Indian Supreme Court cancelled 122 spectrum licenses and ordered a shift from discretionary allocation to an auction system, causing spectrum acquisition costs to soar. This rapidly worsened the business environment for Tata Teleservices.
Over the five years following its investment, DoCoMo booked related losses of about 222 billion yen, including impairment losses. The high-quality, high-value-added business model it had cultivated in Japan proved fundamentally incompatible with India's ultra-low-price market.
What made matters even more serious was that the withdrawal process itself became difficult. The contract between DoCoMo and Tata included a put option clause allowing DoCoMo to sell its shares if performance targets were not met. However, when DoCoMo tried to exercise this option, Tata refused to comply, and the dispute between the two was brought to international arbitration.
In the end, in 2017, following a ruling by the international arbitration tribunal, Tata paid DoCoMo about 144.9 billion yen in damages, settling a dispute that had dragged on for about three years. But beyond the gap between the total invested and the amount recovered, the cost in lost management resources and time is immeasurable.
In 2008, Daiichi Sankyo acquired Ranbaxy Laboratories, a major Indian generic drugmaker, for about 490 billion yen. At the time, this was the largest overseas M&A ever undertaken by a Japanese pharmaceutical company, and it was a bold strategy aimed at shifting from a business model dependent on new drugs to a hybrid model that included generics.
However, problems erupted immediately after the acquisition was announced. Serious quality control problems came to light at several of Ranbaxy's factories in India. The US FDA (Food and Drug Administration) banned the import of products from Ranbaxy's plants, effectively cutting off access to the US market, the world's largest pharmaceutical market.
This quality problem had not been adequately identified during the pre-acquisition due diligence, and combined with the post-acquisition stock price collapse, Daiichi Sankyo was forced to book losses of about 450 billion yen. The company-defining M&A came to be remembered as one of the "worst failure cases" among Japanese companies' overseas investments.
In 2014, Daiichi Sankyo decided to transfer its entire 63.4% stake in Ranbaxy to Sun Pharmaceutical Industries, another major Indian generics maker. The Ranbaxy shares were exchanged for about a 9% stake in Sun Pharma, and Daiichi Sankyo's India generics strategy was reduced to nothing. Six years passed from the acquisition to the withdrawal, and the sums and opportunities lost in that time were enormous.
At Ricoh India, its Indian sales subsidiary established in 1993 (73.6% owned by the Ricoh Group), signs of accounting fraud involving inflated profits surfaced in November 2015. Ricoh India's business was centered on selling and servicing multifunction printers, with revenue of about 20 billion yen, but it had chronically been running at a loss.
As the investigation into the accounting fraud proceeded, the scale of the losses turned out to far exceed initial expectations. Ricoh had continued providing financial support up to that point, including underwriting capital increases and writing off Ricoh India shares without compensation, but in 2017 it decided to cut off support, announcing it expected losses of up to 36.5 billion yen related to India.
In January 2018, Ricoh India filed with a local court to begin corporate reorganization proceedings, with total liabilities reaching 36.3 billion yen. In the end, in 2019, all of Ricoh's shares were transferred to and cancelled by a local Indian company, closing the book on Ricoh's directly operated business in India.
Ricoh's case drives home just how important governance over overseas subsidiaries is. The fact that fraud went unnoticed for a long period at a geographically and culturally distant Indian subsidiary exposed weaknesses in the Japanese head office's management system. This is not someone else's problem; it applies to every company entering India, regardless of scale.
In Daiichi Sankyo's acquisition of Ranbaxy, a core risk, the state of quality control at the factories, was overlooked in the pre-acquisition investigation. Corporate transparency in India is lower than in developed countries, and surface-level financial data alone can fail to reveal the true risk. For food companies too, FSSAI thorough prior investigation of regulatory compliance status and supply chain quality control is essential.
DoCoMo was swayed by the figure of a "1.4 billion-person mega market" and underestimated the severity of the ultra-low-price competition. A large market size does not necessarily mean high profitability. India Market In [any market entry], it is important to calmly analyze the gap between the potential market and the market you can actually target.
The deterioration of the relationship between DoCoMo and Tata, and the quality problems between Daiichi Sankyo and Ranbaxy, both illustrate the difficulty of managing a relationship with Local partners. Designing joint venture contract clauses, clarifying exit conditions, and maintaini
As DoCoMo's withdrawal, which developed into three years of litigation, shows, withdrawing from India can sometimes be harder than entering. Given the complexity of India's legal system, foreign investment regulations, and labor laws, an exit scenario and concrete procedures should be considered at the time of entry.
As Ricoh's case shows, physical and cultural distance from Japanese headquarters raises the risk of a subsidiary's misconduct going unnoticed. Beyond placing a trusted Japanese expatriate locally, regular third-party audits and a whistleblower system need to be put in place.
Based on the failure patterns above, here are concrete measures for Japanese food companies to minimize risk when entering India.
A pre-entry checklist
First, thoroughly research India's food regulatory environment. Understand FSSAI's approval process, labeling regulations, and the tariff structure for imported food in advance to prevent unexpected costs. Next, investigate prospective local partners not just on their financial standing but also their track record in past partnerships, their management's reputation, and any history of legal disputes. Finally, draw up an exit plan in advance assuming a worst-case scenario, and build clear exit clauses into the joint venture contract.
A governance structure after entry
After entering, a management structure should be built around monthly financial reporting, quarterly site visits, and an annual third-party audit as the basic framework. In particular, continuously monitoring indicators such as the status of accounts receivable collection, the actual state of inventory management, and employee turnover makes it possible to catch problems early.
Rather than entering the Indian market all at once with a large initial investment, a phased approach that gradually expands investment is recommended. Start by testing the market through exports or licensing, and after understanding local consumer reaction and operational challenges, consider full-scale entry through a joint venture or a wholly owned subsidiary. This approach keeps losses limited even in the event of a withdrawal.
India's business culture differs greatly from Japan's. Differences in negotiating style, decision-making speed, and attitudes toward contracts can lead to a breakdown in partnerships. It is important to conduct cross-cultural training before entering and to place Japanese or local staff who are well versed in local business customs in key positions.
Rule 1: "Start small, grow big"
The cases of DoCoMo and Daiichi Sankyo show how much a huge initial investment can amplify risk. Food companies should first run test marketing with a limited product lineup in a limited region, and scale up in stages while confirming the market's reaction.
Rule 2: "Never enter without an exit"
Drawing up an exit plan alongside the entry plan is never a negative thing. On the contrary, it is evidence of a calm risk assessment and a form of accountability to investors and management. Exit conditions should be made clear in every joint venture contract, lease contract, and employee employment contract.
Rule 3: "Trust the local side, but verify"
Trust in local partners and local staff is essential, but the stance of "trust but verify" must not be forgotten. Combining regular audits, reports from multiple information sources, and checks by an independent third party can prevent fraud like Ricoh's before it happens.
NTT DoCoMo's roughly 267 billion yen, Daiichi Sankyo's roughly 490 billion yen, Ricoh's roughly 36.5 billion yen: these figures eloquently speak to the scale of risk the Indian market carries. But at the same time, these failures were also "avoidable failures." With sufficient due diligence, proper partner management, a phased investment approach, and an exit plan prepared in advance, losses of this magnitude would not have had to happen.
When Japanese food companies take on the Indian market, they should not let the pain of those who came before go to waste, and should put the lessons and risk management measures shown here to use. India is indeed a market with substantial risk, but it is also a market that holds even greater potential. Wise risk management is exactly the key to unlocking that potential.
That withdrawing from India can be harder than entering it. There are cases where disputes over the dissolution of a joint venture or the exercise of a put option escalated into long-running conflict and arbitration, and entering without an exit strategy carries major risk. It is important to draw up an exit plan at the same time as the entry plan.
There is a case where a business was hit directly by changes in the external environment that are hard for a company to control on its own, such as ultra-low-price rate competition and shifts in government regulation and licensing policy. In addition, a conflict over the terms for buying back shares at the time of withdrawal was brought to international arbitration and took a long time to resolve. This shows the importance of clarifying exit conditions at the contract stage.
There is a case where quality control problems surfaced after the acquisition of a major generic drugmaker, cutting off access to a key export market and leading to massive losses. The lesson is that the pre-acquisition due diligence failed to adequately capture quality and compliance risks, and the company ultimately withdrew by transferring its shares.
Insufficient due diligence, overestimating the local market by being swayed by its sheer size, insufficient management of partner risk from weak design of joint venture and exit clauses, a lack of an exit strategy itself, and subsidiary management becoming a formality. All of these are considered failures that could have been avoided with proper preparation.
There are cases where accounting fraud and similar issues went unnoticed for a long time at a geographically and culturally distant subsidiary, highlighting the importance of overseas subsidiary governance. Ongoing monitoring by the head office, through monthly financial reporting, regular site visits, and third-party audits, is essential.
Before entering, research the FSSAI approval process, labeling regulations, and import tariffs, check local partners' finances and history of disputes, and put together a contract with exit clauses built in. After entering, monitor accounts receivable collection, inventory, and turnover, based on financial reporting, site visits, and third-party audits. A phased approach that tests the market through exports or licensing before moving to full-scale entry keeps any eventual withdrawal losses limited.
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