India Panel Advises $100 Million Minimum Retail Investment
“The government will consider and take an early policy decision,” Anand Sharma, minister for commerce and industry, said in parliament yesterday. India’s cabinet will decide on the panel’s recommendations, which propose easing ownership rules for stores that sell more than one brand, he said.
India bars foreign ownership in multi brand retail operations. Overseas investors are allowed a 51 percent holding in shops selling one brand, and 100 percent in wholesale stores. Wal-Mart and Carrefour, who operate wholesale outlets in India, seek to expand in a market that Business Monitor International estimates may double to $785 billion in 2015 from $396 billion this year.
“International retailers should not have an issue on the quantum of money that needs to be invested,” said Saloni Nangia, senior vice president at Technopak Advisors Pvt., a consultant based near New Delhi. “This would surely be a part of the investment they are looking at.”
Shoppers Stop Ltd., India’s second-largest listed retailer, gained 1 percent to 413.7 rupees at 2 p.m. in Mumbai trading, after jumping as much as 12 percent yesterday.
Arti Singh, a spokeswoman for Wal-Mart’s India operations, didn’t respond to calls to her mobile phone. Mohan Shukla, director of corporate affairs for Carrefour India, didn’t answer calls made to his mobile phone.
Carrefour supports opening India’s food retail sector to foreign investment, said a spokeswoman who declined to be identified, citing company policy. The French retailer can make supply chains in India’s retailing industry more efficient, leading to lower prices, she said.
“Allowing foreign investment in retail would be good for Indian consumers but some of the conditions being speculated on could make it difficult to implement,” Greg Sage, a spokesman at Tesco Plc (TSCO), said in an e-mailed response to questions. The U.K.’s biggest retailer has a franchise and a wholesale-supply arrangement with Trent Ltd. (TRENT), a part of India’s Tata Group.
About 40 percent of India’s fruit and vegetables rot before they are sold because of a lack of cold-storage facilities and poor transport infrastructure, according to the government.
Overseas investment in multi-brand stores may be allowed up to 51 percent, the panel is said to have recommended, a finance ministry official with knowledge of the matter said on July 22, requesting not be identified before a public announcement. The trade minister didn’t comment on the ownership limit yesterday.
“The recommendations of the committee of secretaries are very specific,” Sharma said. “There has to be a defined percentage which will go only into the building of infrastructure, and the minimum investment as has been recommended should not be less that $100 million.”
Pantaloon Retail India Ltd. (PF), India’s largest listed store owner, rose as much as 3.5 percent to 332.2 rupees before trading at 318.7 rupees, down by 0.7 percent. The Bombay Stock Exchange’s Sensitive Index fell 0.8 percent.
The panel has suggested half the jobs generated by foreign investors in retail should be in the rural sector, and at least 30 percent of all products should be sourced from small and medium enterprises, Sharma said. The government has not formally received the recommendations, he said.
Foreign companies have set up wholesale operations in India to gain a foothold in the nation. Bharti Walmart Pvt., a venture with billionaire Sunil Mittal’s Bharti Enterprises Pvt., runs seven wholesale stores, while Carrefour opened its first such store in December. Germany’s Metro AG owns six cash-and-carry stores in India, according to its website.
Wal-Mart may open hundreds of retail shops in the country if the rules are changed, Raj Jain, chief executive officer of its India venture, said last year. Foreign direct investment in multi-brand retailing would help cut waste, Jain said in May.
Wal-Mart has “intensive plans” to expand in India, Asia chief Scott Price said March 30. Its annual sales in India amounted to less than $1 billion, compared with $8 billion in Japan and $7.5 billion in China, he said.
Reliance Retail Ltd., a subsidiary of Reliance Industries Ltd., plans to double clothing retail stores to 100 by the end of the year, chief executive officer Arun Sirdeshmukh said July 4. The unit of India’s largest company by market value also plans to open wholesale stores, billionaire Chairman Mukesh Ambani said June 3.
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