Indian retailers in a catch-22 situation on FDI in retailWednesday, 07 December 2011
The sudden development in the government’s plan has now put the retail majors in a fix since they had already initiated fresh talks for liaison with foreign retailers, with the hope that they would soon be able to bring the much required funds. For instance, the Future Group’s growth, which is currently at 25-30 per cent, would have increased to the growth rate to 40-50 per cent with the foreign investment. The group is reportedly in talks with multiple partners, including Carrefour.
RP-Sanjiv Goenka Group, which runs the 230-plus Spencer’s Retail stores across India, was banking upon the foreign investment too since it would have helped them in achieving the planned retail expansion. In a press conference held next day, after FDI announcement, group’s chairman Sanjiv Goenka had reiterated the same feelings. The group’s retailing business logged revenues of Rs 1,056 crore and a loss of Rs 286 crore in 2010-11. Sumantra Banerjee, president (retail) at RP-Sanjiv Goenka Group, points out FDI in retail is a must as the sector needed fresh funds. "Foreign investment in the business would have accelerated Spencer’s expansion plans." Spencer’s is banking on retail FDI to attract funds to grow and break even by attracting investment in the back-end operations.
Bharti Retail too is looking at taking their alliance with Wal-Mart to the next level by setting up multi-brand stores in India. Videocon Group, owner of Next, with more than 600 stores, is reportedly in talks with large electronic retailers, including the $50-billion consumer electronics retail giant Best Buy.
But now the question mark over implementation of the FDI policy will have to indefinitely wait for an answer. Foreign retail giants, equally keen on capturing the pie in India’s Rs 20 lakh crores retail market are keeping track of the latest developments on the matter. Industry is now expecting the government to initially open the sector to foreign investors and private equity funds, if not the retailers, till political consensus is reached. The much talked about FDI policy, which was applauded as the bold move of the Indian government to bring in reforms… is for now lying in the cold storage.