Opposing FDI in Retail (51%) !!!

Opposing the suggestion of Committee of Secretaries to allow 51 per cent FDI in multi-brand retail, the Confederation of All India Traders today said the move will adversely affect “crores” of small shopkeepers.

“CAIT will hold a protest dharna at nearly 100 paces in different states of the country on July 26,” the traders association said in a statement.

The Committee of Secretaries (CoS) in a meeting yesterday agreed to allow foreign investment in the politically-sensitive sector. However, the proposal requires cabinet approval.

“(the move) will adversely affect crores of shopkeepers and also badly hit people who are dependent upon retail trade for their livelihood,” CAIT National President B C Bhartia said.

The Association alleged that the CoS recommendations came after strong lobbying by the global retailers and domestic corporate houses.

FDI on the way

India is trying to build a consensus on liberalising foreign direct investment (FDI) in retail and defence, finance minister Pranab Mukherjee today told a gathering of business leaders and policy makers in Washington.

“Discussions are under way to build a consensus on further liberalisation of the FDI policy in retail and defence,” Mukherjee said.

Differences exist within the Indian government on the appropriate policies for foreign direct investments in the two sectors. The commerce ministry has proposed majority FDI in defence and retail, but the defence ministry wants a maximum of 49 per cent FDI in its field. Some other ministries are opposed to the freeing up of retail and have asked foreigners to invest heavily in cold chains and retail logistics.

Washington is keenly awaiting New Delhi’s moves on retail. The Indian government allows 51 per cent FDI in single-brand retail and 100 per cent in wholesale cash-and-carry. However, multi-brand retailers such as Walmart and Tesco are barred. 

Power of Private Labels (Part 1)

   Pantaloon Retail, part of the Kishore Biyani-promoted Future group, has set its eyes on enhancing the basket of private label products sold at Big Bazaar, the hypermarket format from the retail major.

“We already have a range of private label products at our hypermarkets in apparel, food and electronics. At present, this segment contributes about 12-14 per cent to our sales. We are planning to increase this to 25 per cent in the next two years,” Mr Rohit Malhotra, Head (Operations – South Zone) of Pantaloon Retail, told Business Line.

“We have crossed the critical mass of 45-50 a few months ago, opening up the opportunity in private labels. This number supports a certain amount of manufacturing, ensuring cost competitiveness,” he said.

The Big Bazaar network currently has 70 stores across major cities, including 22 in the South.

The portfolio of products in food, electronics, apparel and cosmetics would be expanded. The company, however, would take the outsourcing route instead of having its manufacturing lines. “A big chunk of private label products would come from outsourcing,” he said. 

Koutons Retail Plans To Dilute 15% Stake To Repay Debt

      Apparel maker, Koutons Retail India is planning to sell 15% stake to raise funds to pay debt and revive its operations. Private equity players like TPG Capital and Banyan Tree Finance, and a Mumbai-based apparel firm are in talks with the founders of Koutons for a deal.

Koutons is also in talks with lenders to recast its debt in line with the current business environment

Koutons has been finding it difficult to repay the debt due to decline in sales.  As on 31st March 2010, it had a debt of Rs.660 Cr. The accumulated debt and high interest cost has led to reduction of its operations to 1,020 stores pan-India from 1,400 stores in early 2008.

It posted 53.21% decline in it sales to Rs.162.47 Cr in quarter ended September 2010 as against Rs.347.25 Cr for the same period last year. Its net profit declined by 90.42% to Rs.2.26 Cr in quarter ended September 2010 as against Rs.23.59 Cr for the same period last year.

Koutons, which got listed in 2007, raised long-term debt from a consortium of banks led by Indian Overseas Bank two years ago to take advantage of the then booming retail sector. It started as a men’s brand in India, but later extended its portfolio to accommodate women and children wear.

But the economic slowdown in 2008 had an adverse impact on overall sales and the company had to stall expansion plans. Inventories piled up and the company fell short of cash.

Koutons currently operates a mix of both company-owned and franchisee apparel stores across India.

During the last few months the company has witnessed the exit of three directors and two senior executives. Rajiv Grover, an independent director and Anil Khatod resigned in August and Ajay Mittal, a nominee director of UTI Venture Funds Management also resigned in the same month.

Similar situation was seen with Subhiksha which went on aggressive expansion plans and then became defunct and the other was Vishal Retail which managed to overcome by selling its business to TPG Capital and Shriram Group.

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Government to talk to states on FDI in multi-brand retail

Food and Agriculture Minister Sharad Pawar Wednesday said the government will talk to the states about opening up the multi-brand retail sector to foreign direct investment.

The minister said there were 'serious problems' in allowing 100 percent foreign direct investment (FDI) in retail as it would affect the interest of small shopkeepers of the country.

'It will give good prices to farmers and consumers will also get wider choices. But we cannot bypass the small shopkeepers,' he told the Economic Editors' Conference here.

India allows 51 per cent FDI only in the single-brand retail. Multi-brand retail is restricted to cash-and-carry or wholesale outlets.

Rel Retail plans 4,000 stores in 4 yrs

Mukesh Ambani promoted Reliance Retail plans to set up around 3,000-4,000 stores in 19 formats in the next 4 years. The company is predicting 100% growth for the financial year 2010-11. Reliance Retail currently operates 19 formats such
as Reliance Fresh, Reliance TimeOut, Trendz and Digital and Jewels, among others.

The company is also aiming at entering the cash-and-carry business by opening around 3 outlets in the next 6-8 months. The cash and carry stores will have a square feet area 1.5 lakh.

The company has projected Rs 45,000 crore turnover from the retail business in the next five years. It is also bringing global brands like Hamleys, Diesel and Marks & Spencer under its roof in all formats.