India Retailers Gain After Single-Brand FDI Limit Removed

Jan. 11 (Bloomberg) --Pantaloon Retail India Ltd. (PF) climbed to its highest in four weeks, leading a surge in shares of Indian vendors after the government yesterday formally removed the limit on foreign investment in single-brand retail.

Pantaloon, India’s largest retailer, gained 4.4 percent to 153.30 rupees, the highest since Dec. 13, in Mumbai. India’s benchmark Sensitive Index (SENSEX) rose 0.1 percent.

India yesterday ratified a Nov. 24 decision to allow foreign companies full ownership of stores selling a single brand, from 51 percent earlier. The decision eases the entry of single-brand retailers such as Starbucks Corp. (SBUX) and Ikea into the nation’s $400 billion retail market, allowing them to operate without a local partner. It also raised expectations that the government might loosen restrictions on foreign multi-brand retailers like Wal-Mart (WMT) Stores Inc., which are still excluded from India’s retail market.

“People think that this would lead to a positive stance on multi-brand retail soon,” Sameer Narang, a Mumbai-based analyst with HDFC Securities Ltd., said by telephone. “My opinion is that it’s not coming any time soon, given the way things went the last time the government tried to introduce it.”

Prime Minister Manmohan Singh has pledged to open India to overseas companies after reversing a decision last month to let multi-brand retailers such as Wal-Mart and Carrefour SA open supermarkets in India’s retail market. Singh’s administration has struggled to advance its initiatives amid opposition from its own allies and a corruption scandal that paralyzed parliament.

Provogue India Ltd. (PROV), an apparel retailer, rose 8.4 percent. Shopper’s Stop Ltd. (SHOP) gained 5.1 percent, and Trent Ltd. (TRENT), which has a franchise agreement with Tesco Plc, climbed 1.9 percent.

“We hope the initiative is a precursor to further liberalization in the sector in the days to come,” Rajan Bharti Mittal, managing director at Bharti Enterprises, Wal-Mart’s India partner for wholesale stores, said in an e-mailed statement.

To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net.

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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