| Tesco, Vodafone receive big- bang FDI clearances |
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New Delhi, 30 December Two days before New Year, the government on Monday approved British retail giant Tesco Plc's plan to invest $ 110 million to buy 50 per cent stake in Tata Group's Trent Hypermarket Ltd (THL). With this, Tesco will become the first foreign player to open stores here that will sell anything from fruit to furniture. The nod given by the Foreign Investment Promotion Board (FIPB) is expected to open the doors for future investments by foreign retailers. So far the market has been dominated by domestic players such as Tata's Trent, Future Group, Reliance Retail and Aditya Birla Retail. While in its application the company has stated that it will invest $ 110 million ( around ₹ 680 crore), the amount " could be scaled up later depending on how operations expand in the initial three to four years", asenior official told Business Standard. According to the FDI policy in place, the company has to invest a minimum 50 per cent of the $ 110 million in creating new back- end infrastructure. Back- end infrastructure refers to packaging, logistics, storage and warehouse, among others. The FIPB meeting, chaired by Economic Affairs Secretary Arvind Mayaram, also approved British telecom group Vodafone's $ 1.6- billion investment plan to take full ownership of its India business. The proposal is yet to get Cabinet approval. Turn to Page 20 > VODAFONE'S JOURNEY |2007: Vodafone Plc enters India by buying 67% stake in Hutch- Essar for $ 11.1 billion, gets a notice on why it had not deducted tax. The company moves high court, which dismisses its plea |2010: Vodafone challenges order in a writ petition, which is again dismissed. |2011: Company raises stake in Indian entity to 74% |2012: Supreme Court rules in favour of Vodafone. Govt brings retrospective amendments allowing it to tax Vodafone- type deals |2013: Cabinet approves conciliation with Vodafone. Company seeks approval to raise stake in Indian entity to 100% and gets approval THE ROAD TO TESCO'S DEBUT Retail giant enters India, to invest $ 110 mn; Vodafone can buy 100% stake in India arm |Nov 24, 2011: CCEA allows 51% FDI in multi- brand retail but puts it on hold later due to protests from opposition parties, traders and farmers |Sept 14, 2012: FDI with 51% cap rolled out with stiff riders |Aug 1, 2013: Govt relaxes three contentious norms |For the 30% mandatory local sourcing norm, definition of micro, small and medium enterprises expanded |Govt mandates 50% investment in fresh back- end infrastructure |Retailers allowed to open stores in all such states that agree to implement policy |Oct 9, 2013: US retailer Walmart quits six- year partnership with Bharti Enterprises. The move seemed to have spelled doom for the country's multi- brand retail segment |Dec 17, 2013: Tesco applies to DIPP to invest $ 110 million in collaboration with Trent Hypermarket Ltd, a Tata group enterprise |Proposal mentions that the JV would operate through a chain of stores under banners including Star Bazaar, Star Daily and Star Market, with the tagline ' A Tata and Tesco Enterprise' |Dec 30, 2013: Tesco' s proposal is approved COMPANIES 2 > >More dollars to flow into Indian retail after Tesco clearance >Vodafone's stake buyout a fillip to India arm value |
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| Tesco, Vodafone receive big- bang FDI clearances | ||||||
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Tesco wants to initially focus on Karnataka and Maharashtra where it already has 16 stores with partner Trent Hypermarket Ltd under different banners. For backend infrastructure also, the company might focus on these two regions. The £ 64.8billion grocery and merchandise retailer has said the JV will operate in India through a chain of stores under various banners, including Star Bazaar, Star Daily, Star Market —their tag line saying ' A Tata and Tesco Enterprise'. It has plans to open three to five stores every financial year. According to another official, Tesco will not open any stores before the general elections, likely in May 2014. Foreign direct investment (FDI) in multi- brand retail trading was allowed in September 2012 but with a set of conditions that global retailers were opposed to. Major foreign players such as Wal- Mart, Tesco and Carrefour were severely against some of the particular regulations related to mandatory investment in back- end infrastructure, compulsory 30 per cent local procurement norms and restrictions on cities in the FDI policy. Under pressure, the government had to relax the policy in August. In October, the policy suffered another setback with US retail juggernaut Wal- Mart breaking of its six- year partnership with Bharti Group. Tesco's entry might not open the floodgates yet as foreign retailers still have difficulties with the sourcing norms and in scouting for Indian partners. " In the coming months you can see other global retailers present in India making applications. But you need a partner in India to actually go ahead and apply for approvals. Most other global retailers in India are still looking for partners. There are just a few global retail chains that can make the huge investment required," said Arvind Singhal, chairman, Technopak India. According to Pinakiranjan Mishra, partner and national leader ( retail &consumer products), EY, retailers will not play their card before the elections are over, though he added that a rollback of the policy was unlikely. On the Vodafone decision, Mohammad Chowdhury, telecom industry leader and member of global executive team, PwC, said, " This brings more flexibility in terms of operating decisions and would pave the path for fresh investments. As the approval has come before the forthcoming auction of spectrum, it would help the company take future investment decisions better." A decision on the proposal of HDFC Bank to increase the foreign institutional investor holding limit was deferred.
after Tesco clearance RAGHAVENDRA KAMATH & NAYANIMA BASU Mumbai/ New Delhi, 30 December More foreign investment is likely to flow into Indian retailing after the Foreign Investment Promotion Board approved the proposed Tesco- Trent joint venture on Monday. Executives in the segment say some top European, Japanese and Korean retailers are seriously interested. Leading the pack is French retail giant Carrefour, expected to apply to the government by March, said sources in the ministry of commerce and industry. Carrefour has already spoken to Kishore Biyani's Future group and Shoppers Stop- owned Hypercity for apossible alliance, sources said. Hypercity and Aditya Birla have already said they're open to foreign partners in their ventures. " It (approval) paves the way for others like us to look at possible partnerships, to take it to the next logical level," said Govind Shrikhande, managing director of Shoppers Stop. Retailers were keenly observing how approvals would be given to Tesco's application to buy a 50 per cent stake in Trent Hypermarkets, run by the Tatas. Though the government policy mentions fresh investments in Indian ventures, Tesco was investing in an existing chain, triggering a debate on whether it was investment in expansion of an existing venture or in a new one. " Earlier, it meant FDI ( foreign direct investment) can come only in greenfield (new) projects. If the government has cleared this proposal, it means FDI is also allowed in brownfield (expansion of existing ventures)," Shrikhande said. Said Biyani, founder and chief executive of the Future group: " We have to study the whole thing before coming to any conclusions." Devangshu Dutta, chief executive of Third Eyesight, said the policy was the same and the government was still talking about fresh investment. " If any Indian retailer is looking at adding new facilities at the back end and front end and looking for FDI, the policy will benefit them, not retailers looking to capitalise on existing facilities," he said. According to a senior director of a consulting firm, some activity in retail FDI in retail will happen between now and the general elections. "But most of the action will happen after elections." NRETAIL, TELECOM BIGGIES GET NEW YEAR GIFT N Company Stores Future Group 150 Big Bazaars and others* Hypercity 5 stores Aditya Birla 497 supermarkets, Retail 16 hypermarkets *Others include Central, Brand Factory and Ezone
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