The opening up of India’s multi-brand retail to foreign chains will see Asian companies such as Japan’s Lawson jostling for space with Western giants such as Walmart, Tesco, and Carrefour.
The Cabinet today decided to operationalise FDI in multi-brand retail and eased rules for foreign investment in single-brand retail.
The move is beneficial for Indian retailers such as Kishore Biyani’s Future Group, Reliance, Tata’s Trent and Shoppers Stop, which can now raise long-term capital for expansion and develop partnerships with global players.
For foreign chains such as Walmart and Tesco, who are present in India through cash-and-carry partnerships, the move will allow them to graduate from wholesale trading to retailing.
Future Group has been in discussions with Carrefour and the deal could be finalised after this move. However, the Biyani family has also been in talks with Japan’s Lawson for their Big Bazaar chain. The details will now be finalised, say analysts. Biyani hinted that he would be keen on cash infusion rather than a partner who would wrest control of his retail empire.
Hong Kong-based A.S.Watson has said it would be keen on entering India once the rules were finalised. A.S.Watson, along with German retail giant Metro and British chain Sainsbury’s, would be in hunt for local partners.
Analysts said the move could transform India’s $500-billion-plus retail market and tame inflation.
While Walmart has a tie-up with Bharti Enterprises to run cash-and-carry stores and provide back-end support, UK’s Tesco has a franchise agreement with Tata-run Trent.
“The objective of the policy is to attract investment, create local manufacturing and employment,” said industry minister Anand Sharma.
The Indian retail market, which was around $220 billion in 2005, is now expected to hit $700 billion by 2015.
“Our plan is to look at the policy in detail, understand them, start talking to state governments that are supporting FDI in retail and then open stores there,” said Raj Jain, MD & CEO, Bharti Walmart India, adding that they will be making announcements “soon”.
Walmart, which has been trying to set up multi-brand shops in India for a long time, spent nearly $1.5 million on lobbying in the quarter ended June 30, 2012 on various issues.
Major Japanese retail firms such as Lawson, Yong, Seven & Holdings and Ito Yokado — they have huge bases in China and South-East Asian countries with scores of supermarkets and back-end sourcing — have been keen on entering the Indian retail sector since 2010 and have been lobbying the government for the relaxation of norms.
By late 2011, the Future Group was in advanced talks with Lawson to invest in the holding company that will control firms which supply to Big Bazaar, Food Bazaar and KB's Fair Price, among others.
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