Warc Blog

Indian retail faces shake-up

24 December 2013
NEW DELHI: The Indian retail sector is facing major changes with Tesco, the UK supermarket chain, becoming the first international retailer to apply to open multi-brand stores in India, and the government also processing a raft of applications for single-brand stores.

The Tesco news comes more than a year after the Indian government announced the relaxation of rules on foreign direct investment in multi-brand retail and permitted overseas companies to own 51% of a joint venture.

Tesco is seeking approval to invest $110m in partnership with a Tata subsidiary, taking a 50% stake in Trent Hypermarkets, which in turn operates Star Bazaar stores in the states of Maharashtra and Karnataka.

"In multi-brand retail trading, the first [application] has come," Commerce and Industry Minister Anand Sharma said in remarks reported by the Economic Times. "There will be more and I think another European major will come," he added, while declining to provide details.

Sharma said his ministry would fast-track the process of clearance for Tesco. "It will be an expeditious approval," he stated.

In single-brand retail, stores such as IKEA and H&M, have moved quickly to take advantage of a similar easing of FDI restrictions which raised permitted foreign investment levels from 51% to 100%. An official at the Department of Industrial Policy & Promotion said that it currently had 17 single-brand retail proposals.

"The rush of single-brand proposals is a very positive signal in terms of investment climate in the country. The initial apprehensions about the policy seem to be waning," said Akash Gupt, an executive director with PwC, the consultancy.

Last month, Swedish clothing giant Hennes & Mauritz received approval to open 50 stores across the country with a planned investment of Rs700 crore. Before that, Swedish furniture maker Ikea received approval for its plan to set up stores in the country with an investment of Rs10,500 crore, the largest single-brand retail proposal by value in India so far.

Data sourced from Economic Times; additional content by Warc staff

 
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