Indian Economy News

FIPB clears five retail proposals worth Rs420 crore

  • Livemint" target="_blank">Livemint
  • October 16, 2014

New Delhi: The Foreign Investment Promotion Board (FIPB) on Tuesday cleared five retail proposals worth Rs.420 crore from companies such as Puma SA, Bestseller and Flemingo, lifting investor sentiment in retail trading in Asia's third largest economy.

The proposals given the go ahead included two for multi-brand retail trading in duty free goods.

Dubai-based Flemingo International's Rs.190 crore proposal to set up a fully owned subsidiary as well as a 49% investment in an Indian duty free company was approved by FIPB. The company is a global duty free and travel retail operator that first opened shop in the country in 2003.

Also cleared was US-based Miami Perfume Junction's Rs.10 crore proposal for incorporation of a wholly owned subsidiary in India to sell duty free goods in airlines and run duty free shops at airports.

To be sure, most of these brands have been present in India either through franchises or through local joint ventures. The current proposals are designed to give the firms further control of their India operations.

Additionally, the board cleared three 100% single-brand retail proposals worth Rs.222.5 crore, suggesting renewed interest in India's growing retail market.

German sportswear retailer Puma; Danish fashion wear company Bestseller and American soap retailer Lush received clearances to operate 100% company-owned retail operations in the country.

Bestseller Retail, which operates 3,000 stores in Europe, West Asia and India across various fashion brands, said it will invest Rs.210 crore into its three brands in the country.

Bestseller has sought approval for establishing a wholly-owned subsidiary for each of its three brands-Jack and Jones, Vero Moda and Only. Part of the application has also sought approval to acquire 100% equity in Best United India Comforts Pvt. Ltd, one of the company's franchise partners. The applicant currently proposes to make an investment of $5 million for acquisition of equity shares from existing shareholders as well as for setting up single-brand retail stores in the initial stages.

It operates a total of 500 points of sales in India through a franchise model with the Mumbai-based Aggarwal family, promoters of textile company Bombay Rayon Fashion Ltd.

The firm will use the capital to add more retail stores in the country, where large foreign fashion brands such as Hennes and Mauritz (H&M) and GAP Inc are in the running to open stores by 2015. The apparel market accounts for 6% of India's consumption expenditure and is expected to touch $225 billion (around Rs.14 trillion today) by 2020, according to a 2012 report by consultancy Boston Consulting Group.

Bestseller's India head declined to comment on the firm's future retail plans for the market.

Additionally, sportswear brand Puma India, that has been operating in the country since 2005, received approval to convert its 51% stake in Puma India Retail, a JV it formed in 2006,to a 100% fully-owned venture through an equity infusion of Rs.10 crore. The firm has sought approval for trading of additional products under the Puma brand.

In September, Puma's close competitor Nike, too, sought the government's approval to open company-owned stores in India.

Puma's India head declined to comment on the firm's plans.

These investments come nearly two years after the government eased norms for retailers to open stores. In September 2012, India allowed 100% entry in single-brand retail trading, with some conditions. Following this, top retailers such as IKEA and H&M announced sizeable investments to tap into India's growing consumerism.

Industry experts suggest there has been a revival in retailers' long- term plans.

"There has been some kind of revival in investor sentiment over the past 3-4 months. Companies are willing to re-examine India plans for the long haul. Regulatory hurdles aside, the overall sentiment in the consumer space has seen a revival," said Joydeep Bhattacharya, head of consumer products and retail practice at consultancy Bain and Co. India Pvt Ltd.

American soap maker Lush has received approval to convert its existing business to a wholly owned unit in India to undertake single brand retail trading of Lush products, worth Rs.2.5 crore. The company has been selling soaps in the country since 2004.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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