Latest Property News on 'Retail Market in India'

Economic Survey Demands Foreign Investment in Multi-Brand Retailing

The Economic Survey for 2008-09 Finance Minister Pranab Mukherjee tabled in parliament Thursday has advocated sweeping policy changes like foreign investment in multi-brand retailing and higher foreign stake in insurance companies. The survey report card suggested the cap on foreign equity in insurance sector be raised to 49 per cent from 26 per cent currently. According to it, the limit of foreign equity can even be raised to 100 in case of health and weather insurance. (Weather insurance products are aimed at enhancing the risk-taking capacity of farmers, banks, micro-finance lenders and agro-based industries).

“This may help dispel fears of foreign equity in insurance,” the survey said. In the area of external reforms, the survey favoured foreign investment in multi-format retailing starting with food despite opposition to the idea. “Foreign direct investment in multi-format retailing should start with food,” it said, suggesting that for five years these companies must also have wholesale outlets for small and unorganised retailers. Other major initiative suggested by the annual survey was allowing foreign equity in the defence sector up to 49 per cent. The survey added that this limit can be stretched to 100 per cent in the case of high technology and strategic defence goods, services and systems that can help eliminate import dependence. Read More »

Reliance Retail Plans to Purchase Henkel India’s Soap Brand

Mukesh Ambani’s Reliance Retail has put in bids to acquire two of Henkel India’s soap brands, a sign of the big ambitions it has in the fast-moving consumer goods (FMCG) business. Any deal for the male deodorant soap Aramusk and Moloy sandalwood soap, put up for sale late last year, is estimated to be worth about Rs 10 crore. The Henkel brands are unlikely to generate significant revenues at the national level, but they are attractive buys locally, especially in the eastern part of the country. Reliance Industries (RIL), the parent of Reliance Retail, has identified the FMCG sector as the next big growth area, and is planning to set up two or three subsidiaries to manage the business. What started as a private label initiative for Reliance Retail has now grown into a large business idea, said two persons close to the development.

They said the entire business (manufacturing and distribution) will be operated through third parties with Reliance controlling the brand and the technology behind it. The plan is to create consumer brands, acquire them and get into joint ventures with existing companies, a top company official said. Chennai-based Henkel had earlier put four non-core brands on the block, that included Maha Bhringol hair oil and Tuhina skin cream. ET has learnt that Reliance is not interested in acquiring the hair oil brand and Henkel has decided to retain Tuhina as its core brand. The Emami group is also in the race for the Henkel soap brands, but a person close to the deal process said Reliance has bid higher. Mumbai-based consumer goods firm Jyothy Laboratories also considered acquiring the brands, but it couldn’t be ascertained if it is still in the race. Mape Advisory Services is the investment banker for the deal. Aramusk and Moloy were owned by Shaw Wallace India before Henkel acquired them in 1999. Reliance Retail and Henkel India declined to comment. Read More »

Retail Expects High from Budget 09

UPA coming into power in good numbers raises new hopes for the retail sector in India. Like any other sector, retail has also been witnessing a sharp decline in revenues. Given that the retail trade functions on paper thin margins; this decline in revenues has had a cascading effect on the profitability. There is credit crunch in the market and bankers are not easily lending money. In such a scenario, retail players are concentrating on promoting in-house brands, changing product profiles, adopting innovative means of funding operations, relooking at supply chains, repositioning the business model and are also on a look out for opportunities of consolidation.

Opening up of foreign direct investment ‘FDI’ in multi brand retail has been the long standing demand of retail sector. As this has been one of the budget wish list of the retail sector, it is the industry’s expectation that the UPA coming into power in good numbers will help in getting through this proposal. Recently, Department of Industrial Policy and Promotion (DIPP) had clarified by means of a Press Note that if the Indian investment company (IIC) is owned and controlled by residents, then a step down investment by IIC in any Indian company is not considered as FDI. This would be the case, even if, there is a foreign investment in IIC upto 49 percent. Read More »

Hope Arises for Retail Sector

Consumers have started trickling back to malls and department stores as the economy is stabilizing, say many large retailers, who expect sales to further improve in the months ahead. This sentiment is spread across segments, from value retailers such as Vishal Retail to specialized chains such as The MobileStore, which sells cellphones and accessories and is part of the conglomerate Essar Group, to Reliance Retail, part of the Reliance-Anil Dhirubhai Ambani Group. Pantaloon Retail (India) Ltd, the country’s largest retailer by revenue, witnessed around 8% growth in same store sales for the month of May compared with the same period last year. In April, the company said it had an increase of 7% and 5% in March.

Vishal Retail, which shut two apparel manufacturing units and two stores during the downturn, is now seeing sales picking up again. Chief executive officer (CEO) Ambeek Khemka said, “Sales are picking up gradually and the company has seen a surge of around 20% overall sales in the last three months.” A Reliance Retail official, who did not want to be identified because of company policy, said, “From April, definitely, the consumer sentiment is positive and we have witnessed an increase in sales by around 15% in the last two months and June is looking better than May.” Rajeev Agarwal, CEO of The MobileStore, said, “In the last three months the sales of the company have increased by around 20% which definitely indicates a positive sentiment.” The upturn comes at a time when economists around the world have been speaking of so-called “green shoots” of recovery after an unprecedented global slowdown sharply cut consumer spending. Read More »

Indian Retailers Concerned over GOVT’s Retail FDI Policy

With Ikea dropping its India plans and a Parliamentary Standing Committee report opposing the entry of heavyweights into the retail trade, Indian retailers looking for foreign tie-ups are in a cautious mood. Faced with the double-edged sword of slowdown and Government policies restricting stake dilution, retailers and market analysts observe that foreign inflow and technical know-how, crucial to the business, could be hampered, if the Government does not act proactively soon. “It is not a zero-sum game. Indian retail needs a lot of funds to establish itself. Foreign players are keen on more control than what they are currently offered. At this juncture, the retail sector has to be supported by Government initiatives and not otherwise,” industry sources said.

The Parliament Standing Committee on Commerce in its report ‘Foreign and Domestic Investment in Retail Sector’, too, has demanded a blanket ban on domestic corporate heavyweights and foreign retailers from entering retail trade in areas such as grocery, fruits and vegetables. It also sought restrictions on their opening large malls to sell other consumer products. An Ikea official was quoted as saying, “We would have liked the government to allow 100 per cent FDI in retail. As it was not in the offing, we shelved our India plans.” A senior industry expert says there are many misconceptions about retail. It is not clear whether parties are opposing foreign direct investment or modern trade itself. FDI is essential as it will bring liquidity and infrastructure into the system, he believes. Read More »

Indian Retailers Concerned over GOVT’s Retail FDI Policy

With Ikea dropping its India plans and a Parliamentary Standing Committee report opposing the entry of heavyweights into the retail trade, Indian retailers looking for foreign tie-ups are in a cautious mood. Faced with the double-edged sword of slowdown and Government policies restricting stake dilution, retailers and market analysts observe that foreign inflow and technical know-how, crucial to the business, could be hampered, if the Government does not act proactively soon. “It is not a zero-sum game. Indian retail needs a lot of funds to establish itself. Foreign players are keen on more control than what they are currently offered. At this juncture, the retail sector has to be supported by Government initiatives and not otherwise,” industry sources said.

The Parliament Standing Committee on Commerce in its report ‘Foreign and Domestic Investment in Retail Sector’, too, has demanded a blanket ban on domestic corporate heavyweights and foreign retailers from entering retail trade in areas such as grocery, fruits and vegetables. It also sought restrictions on their opening large malls to sell other consumer products. An Ikea official was quoted as saying, “We would have liked the government to allow 100 per cent FDI in retail. As it was not in the offing, we shelved our India plans.” A senior industry expert says there are many misconceptions about retail. It is not clear whether parties are opposing foreign direct investment or modern trade itself. FDI is essential as it will bring liquidity and infrastructure into the system, he believes. Read More »

India the most attractive nation for Global Retailers

Providing good growth potential for global retailers amid the economic slowdown, India has emerged as the most alluring market for investment in the retail sector, surpassing the likes of China, Russia and the United Arab Emirates. India has been ranked as the most attractive nation for retail investment among 30 emerging markets by US-based global management consulting firm A T Kearney.

According to the entity’s Global Retail Development Index (GRDI), India is followed by Russia (2), China (3), United Arab Emirates (4) and Saudi Arabia (5). India was placed at the second spot last year. Similarly, the other four countries in the top five have improved their ranking, with the United Arab Emirates jumping 16 places from previous year’s 20th rank. Read More »

IKEA Cancels Indian Investment Plan

The iconic $ 31-billion Scandinavian home products giant, IKEA, has put on hold its plans to set up 25 showrooms across the country for an investment of around $ 1 billion. In an internal communication this week, IKEA told its stakeholders that Indian investment rules do not encourage it to go ahead with its investment plans — at least not in the near future. The country’s norms on foreign investments in retail stipulate that the foreign company can hold no more than a 51% stake and must have an Indian partner. As IKEA’s distinctive showrooms are like sprawling malls, with flat pack furniture, accessories, bathroom and kitchen items, they require high investment. And IKEA has so far been unable to find an Indian partner with not just deep pockets but readiness to invest a matching amount in a joint venture.

It’s learnt that IKEA was hopeful of the rules being relaxed by the new government, but was jolted by Pratibha Patil’s silence on the issue in her presidential address that outlined the UPA government’s agenda. It may have lost heart completely when commerce minister Anand Sharma said that FDI norms are not likely to be changed in the near future, and decided to opt out of India. When contacted, a top IKEA source confirmed the company’s decision. But they were quick to add that India as a market can’t be ignored by IKEA indefinitely. “In a few years we are bound to reconsider our decision,” they said. IKEA had planned its first showroom near Dwarka, at a location that’s between Delhi and Gurgaon. It had also hired 25-30 people for this venture. Their fate now is not known. Otherwise, IKEA has been sourcing many materials from India and employs around 11,000 in this operation, while it claims to be indirectly employing another 60,000. This outsourcing business is estimated at around Rs 1,900 crore. Read More »

Tata’s Unlisted Unit Infiniti Retail Ltd Plans to Open More Small Stores

Infiniti Retail Ltd., an unlisted unit of India’s diversified Tata Group, plans to open more small stores this financial year as a real estate slowdown has made it difficult to get larger stores, its chief executive said. Infiniti Retail, which operates a national chain of multi-brand electronics stores under the Croma brand name, also plans to sell more products under its own label in a move to step up sales, Ajit Joshi told Dow Jones Newswires in a recent interview. The company has large stores that measure about 10,000 square feet-11,000 square feet on average and also smaller format Croma Zip stores.

Mr. Joshi said of the 21 new stores the company plans to open in the financial year that started April 1, 10-12 will be the smaller Croma Zip stores. Of the 31 Croma stores that the company now runs, only two are Croma Zips. “If you look at the Croma Zip strategy, we are looking at 2,500 square feet to 6,000 square feet stores,” Joshi said, adding that it is much easier to get smaller stores than spaces measuring 10,000 square feet. “The slowdown has hit the property business very badly. A lot of (spaces in) malls and (other) properties we had signed got delayed,” Mr. Joshi said. Read More »

Drop in Rentals Lure Retailers towards Metros

With rentals dropping sharply, large retailers such as Aditya Birla Retail, Reliance Retail and Shoppers Stop, and food chains such as McDonald’s are looking at metros and mini-metros for expansion. Aditya Birla Retail and Reliance Retail had started their operations two years ago in Pune and Hyderabad, respectively, as realty costs were too high in metros. However, due to fewer footfalls and lower offtake from retailers, retail rentals have fallen by over 40 per cent in the last six-nine months in many cities, according to retailers and consultants. After they expanded steadily in cities such as Ahmedabad, Mysore, Indore, Vijayawada and Coimbatore, retailers are now all set to expand aggressively in big cities such as Delhi, Mumbai, Bangalore, Chennai and Kolkata. For instance, Aditya Birla Retail, which is setting up 60 supermarkets this financial year and 12 hypermarkets by fiscal 2011, is focusing mainly on Delhi, Bangalore and Mumbai.

“We need rentals lower than Rs 25 per square feet per month to make our business viable. Two years ago, metros were unaffordable. Now, as mall owners prefer to have hypermarkets in their malls, they are ready to come below the market price,” said a senior Aditya Birla Retail executive, who declined to be identified. “We will again look at Tier-II cities in FY11,” the executive said. Having established its value formats such as Reliance Fresh and Reliance Mart in the top 85 cities, Mukesh Ambani’s Reliance Retail is planning to establish its other formats in these cities. Spencer’s Retail is gearing up to open two hypermarkets in Bangalore, one in Chennai, one in Kolkata, two in Hyderabad and two in Pune. Read More »