Why foreign companies in India struggle to grow beyond €3 million

Many foreign companies establish their own entity in India, invest in a local team, and still find themselves stuck below €3 million in revenue, year after year. Klaus Maier, founder of IndiaConnected’s partner company in India, has seen this pattern countless times. Here’s what it actually takes to break through this plateau.

There’s a particular kind of frustration that sets in when a company has done everything right on paper and still cannot seem to grow in India. The numbers stay stubbornly flat. And back at headquarters, patience starts to wear thin.

“Two or three million euros becomes an invincible barrier”, Maier says. He’s seen it in companies that are thriving everywhere else in the world with strong products and solid balance sheets. They hit a ceiling in India that they simply cannot break.

The companies that break through are the ones that decide to become Indian. Not in name, but in the way they operate, manufacture, and go to market.

The invisible wall: Why stalled growth in India is so common

For most foreign companies operating in India, the growth model looks something like this: import your existing product range, sell into the top tier of the market, and build from there. This model works in Germany, France, or the Netherlands, but in India, it runs into a wall.

The top segment of the Indian market, the buyers who can afford premium imported products, represents less than 20% of total addressable demand. And that 20% is fiercely contested.

“The whole world is targeting this segment”, Maier notes. “Every international competitor you have is fighting for the same narrow slice. So growth is inherently limited, not because your product isn’t good enough, but because the segment itself is small.”

Below that top tier sits what Maier calls the belly of the pyramid: a vast middle segment dominated by strong local players who manufacture in India, price for India, and understand the Indian buyer in ways that foreign companies typically don’t. This is where the real volume is. And for most international companies, it remains out of reach.

“If you can’t achieve a gross margin of at least 30%, you don’t make money in India”, Maier explains. “And to get there in the belly segment, you have to become a local player. You have to make in India what you sell in India.”

How stalled growth leads to less investment in India

Stalled growth creates a secondary problem that makes the primary one even harder to solve: local management loses credibility with the mother company.

It’s a vicious cycle. The local managing director knows what needs to happen: invest in local manufacturing, adapt the product for the Indian market, and commit to a longer-term strategy, but years of flat results have eroded their standing with international leadership.

“Local managing directors often know exactly what the solution is,” Maier says. “But when you’ve never been successful, it’s very hard to convince the mother company to invest. The lack of confidence in the local team becomes an obstacle to the investment that would actually fix the main issue.”

Headquarters, understandably, is reluctant to pour more money into a market that is not delivering. The local team, lacking the mandate and resources to make structural change, keeps doing what it can within its constraints. And that means that the revenue wall stays firmly in place.

The solution to stalled growth: ‘Indianise’ your product

The answer is neither a new sales director nor a revised pricing strategy. It’s a fundamental rethink of how the business operates in India, a process Maier refers to as ‘Indianisation’.

“The market often simply cannot absorb your products at the price point you need to make them viable”, he says. “That’s a structural problem, and the only solution is to become local.”

What that means in practice varies, but in general it comes down to moving manufacturing or assembly to India, sourcing components locally where possible, and developing products specifically designed for the Indian market and its price expectations. The goal is not to replicate what works elsewhere, but to build something that works for India.

This approach requires genuine commitment from the mother company, a willingness to see India as a long-term strategic market rather than a short-term revenue target. “The companies that break through are the ones that decide to become Indian”, Maier says. “Not in name, but in the way they operate, manufacture, and go to market.”

India is not a difficult market because of some cultural mystery. It’s difficult because most foreign companies are trying to sell something that wasn’t designed for it, at a price the majority of the market can’t afford, without the local infrastructure to compete with players who have been there for decades.

What a growth plan for India actually looks like

When IndiaConnected works with a company that has hit the revenue wall, the starting point is always giving the local team and the mother company an honest, evidence-based picture of the market: what competitors are doing, why they’re growing, and what the company is not yet doing that would unlock the next stage.

“We show them how their competitors are growing”, Maier explains. “Because often the local team has a sense of what’s needed but can’t articulate it in a way that convinces the board. Part of our job is to build that case.”

From there, the growth strategy typically centres on the path to the belly segment:

• which products could be manufactured locally,
• how to develop quality standards for local sourcing,
• where in India to establish operations, and
• how to structure the organisation to manage a fundamentally different business model.

It’s strategic, operational, and commercial work simultaneously and it requires someone who understands both the Indian market and the realities of running an international business.

Avoid stalled growth by committing to India

The companies that break through the invisible wall share one characteristic: they stop treating India as a market to be served from a distance and start treating it as a market to be built from within.

That shift in mindset, from exporter to local manufacturer, is not easy. It asks something real of leadership. But for companies willing to make that shift, India’s scale becomes an asset rather than an obstacle.

“The potential is absolutely there”, Maier says. “India is not a difficult market because of some cultural mystery. It’s difficult because most foreign companies are trying to sell something that wasn’t designed for it, at a price the majority of the market can’t afford, without the local infrastructure to compete with players who have been there for decades. Once you change that, the market opens up.”

For companies that have been stuck at €2 or €3 million for years and are starting to wonder whether India will ever deliver, that’s the message worth sitting with. The question is whether you’re willing to build the bridge.

Has your India business hit a ceiling?

If your Indian subsidiary has been stuck below €3 million for years and you are wondering what it will actually take to grow, IndiaConnected can help. We analyse what is holding you back, develop a concrete growth strategy, and support you through implementation. Find out how we can help you break through or get in touch directly to schedule an introductory conversation.