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India Retailers Drop on Foreign Investment Risks

March 7 (Bloomberg) -- Pantaloon Retail India Ltd. led a decline among Indian retail companies after India’s ruling Congress party failed to win key regional elections, raising concern that a decision to ease restrictions on foreign investment would be delayed.

Pantaloon, India’s largest listed retailer, declined as much as 5.9 percent, and was 3.2 percent lower at 155.4 rupees at 10:17 a.m. local time. Shoppers Stop Ltd. slumped as much as 8.4 percent and Trent Ltd. fell as much as 3.3 percent.

Prime Minister Manmohan Singh’s Congress Party will not play a role in forming the next administration in Uttar Pradesh, India’s most-populous state, election results announced on March 6 showed. It was also behind in Punjab. The regional Samajwadi Party, which has opposed foreign direct investment in retail, gained a majority in Uttar Pradesh, according to data from the Election Commission.

India on Dec. 7 suspended a decision to allow as much as 51 percent overseas ownership of multibrand retail stores after protests by opposition political parties and some allies of the ruling coalition paralyzed parliament. In an interview in December, Singh said he would make a bid to revive the retail proposals after the state elections.

The poll verdict reduces the chances of the Congress-led government attempting to push through policy changes, including allowing foreign companies to set up supermarkets, according to analysts at Goldman Sachs Group Inc.

“Maybe in one year’s time if the equations change, then probably it can go through, but at least for the next one or two years I guess its delayed.” Sitaraman Iyer, a Mumbai-based analyst with Marwadi Share & Finance Ltd. said in a telephone interview, referring to foreign investment in retail.

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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