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Pantaloon's subsidiary Home Solutions Retail plans to setup 6 stores in Noida, Hydrabad, Gurgoan, Pune, Thane and Bangalore by June 2007 and a topline of Rs. 1000 crore in the 3rd year of operation. Each store will spread across an average of 1,20,000 square foot and involve an investment of around Rs. 14 Crores.
Home Solutions will also setup by June 2006 a dedicated consumer electronics and home appliances division through the e-Zone.
The official press release from the Press Information Bereua on FDI in Retailing and other sectores:
| 100% FDI TO BE ALLOWED ON AUTOMATIC ROUTE IN NUMBER OF SECTORS | |
| 22:13 IST | |
The Union Cabinet today approved a major rationalisation of the policy on foreign direct investment (FDI) to further simplify the procedures for investing in India and to avoid multiple layers of approvals that were presently required in some activities.
The whole FDI policy has been reviewed in an integrated manner, to remove anomalies and inconsistencies. This is not so much an exercise to revise caps, as to simplify and rationalise the procedures. The guiding principle is that for some items requiring industrial licence which are in any case well regulated, there is no need for a second tier Foreign Investment Promotion Board (FIPB) approval, and so these can be put on to the automatic route”.
With a view to facilitating the easier inflow of FDI into India, it has been decided that instead of having to seek FIPB approval, FDI upto 100% would now be allowed under the automatic route for:
¨ the development of new airports; (so far FDI upto only 74% was allowed under automatic route) ¨ laying of natural gas/LNG pipelines; ¨ market study and formulation and investment/financing in the petroleum sector; ¨ cash and carry wholesale trading and export trading; (so far, FDI in wholesale cash and carry trading and FDI beyond 51% in export trading required prior government approval); and ¨ exploration of mining of diamonds and other precious stones. (so far, allowed on automatic route only upto 74%)
It has also been decided that FDI upto 100% under the automatic route would be allowed for:
¨ processing and warehousing in coffee and rubber industry. ¨ Power trading, subject to provisions of the Electricity Act, 2003.
The Union Cabinet has also decided to raise the FDI caps/ceiling to 100 % in case of:
¨ investment in creation of infrastructure related to marketing in petroleum sector and ¨ in captive mining of coal and lignite for consumption by eligible users.
It has been decided to allow upto 100% FDI under the automatic route in the above two sectors.
The Cabinet has also given its approval to remove the divestment condition, which had been imposed earlier, with respect to business-to-business e-commerce. Hitherto while FDI upto 100% was allowed, the investor was required to divest 26% of the foreign equity within 5 years of making the investment. This was seen to be restricting the level of FDI in these sectors.
The Cabinet has also approved to allow FDI up to 51% with prior Government approval for retail trade in ‘Single Brand’ products. This is aimed at attracting investment, technology and best global practices as also catering to the demand of such branded goods in India. This would imply that foreign companies would be allowed to sell goods sold internationally under a single brand, viz., Reebok, Nokia, Adidas. Retailing of goods of multiple brands, even if such products are produced by the same manufacturer, would not be allowed.
(FDI will continue to remain prohibited in coffee and rubber plantations).
The Cabinet has approved to allow FDI upto 100 % for the distillation and brewing of potable alcohol, industrial explosives and hazardous chemicals on the automatic route. This would, however, be subject to other applicable regulations.
So far, FDI in industrial projects located within 25 kms of the urban limits of 23 towns required prior government approval besides an industrial licence. The Cabinet has now dispensed with the requirement of prior government approval and henceforth, FDI in such cases would be eligible for the automatic route.
It has also been decided that there will be no need for approval of FIPB for transfer of shares in an existing Indian company from Indian investors to foreign investors in the financial services and where the provisions of the Securities and Exchange Board of India (SEBI) Takeover Code are applicable in cases where approval of RBI/SEBI/Insurance Regulatory Development Authority of India (IRDA) is also required.
***
YSR/DS/VSR |
With the opening up of FDI in Retailing, irrespective of how much or under what consideration, was always opposed by the Communist Party of India. Now that FDI has been opened in Retailing, the CPI has already reacted by saying they are not sure why the government has taken such a step when they have opposed it.
A spate of protests from individuals, retailers, communists, can be expected. A similar reaction was echoed exactly a year ago when the government took a stern decision to implent Value Added TAX (VAT) after 2 previously failed attempts.
What one needs to observe is the government is trying to get its act together and conform with most of the guidelines of WTO and other treaties and also be amongst its peers. Bringing down taxes to global levels, opening up of the economy, liberalisation, etc is all going to happen sooner or later, with or without polotical support.
With the news of opening FDI in Retailing in India, Kamal Nath, commerce and trade minister has clarified that this will specifically pertain to single brand owners.
The official word is out. India's commerce and trade minister, Kamal Nath, announced a few hours ago new changes and additions to FDI in India.
FDI in retailing is opened upto 51% in single brand retailing. This is the first step to opening up of the retail sector. Previously for single brands to enter India was only through joint-ventures or the franchisee route. Now brands can enter with a majority stake of 51% along with a local partner. This definitely gives the international brands more space to play around.
Liberty has formed a joint venture with Pantaloon to create Footmart Retail India. With over a billion pairs of feet to wrap-up, Liberty and Pantaloon continue to expand thier thirst to open and specialize into every category. Pantaloon appears to be the obvious partner in all fashion related ventures with its ability to roll out new business models and ventures unlike any other retail company in India.
Finally the official word is out. Reliance is all set to venture into Retailing. Unlike any other company, Indian or otherwise, Reliance's plans for India is a mind-boggling. Reliance would be setting aside a whopping US$750 million for setting various formats of retail stores.
Reliance Industries Limited, headed by Mukesh Ambani, which has recently split between the two brothers, has been eyeing Retailing more than Anil Ambani as today Reliance Industries has already lost major businesses like Mobile Phone Services, its Financial and Power units to Anil Ambani.
Reliance obviously for the moment will be stepping into every possible format from min-marts or express stores for those essentials at your nearest Reliance Petrol Bunk, to specialized and category focused chain-stores to supermarkets and hypermarkets.
Gorej Industries would be investing close to $900 over the next 5 years in its two experimental retail formats - Aadhar and Nature's Basket. Aadhar is primarily a rural format selling fmcg products, fertilizers, animal feed etc ideally bringing the real rural masses into thier stores, much alike ITC's e-choupal initiative. Nature's Basket would be Urban format setup in major capital cities.
Just an update to the previous note on the rebranding exercise of RPG FoodWorld. RPG Foodworld has started to rebrand its share of stores as "Spencers Daily".
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