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FDI in retail cleared; 50% in multi brand and 100% in single
brand
The Union Cabinet yesterday cleared 50% foreign direct investment (FDI) in multibrand
retail and 100% FDI in single brand retail (under which companies in the
food, lifestyle and sports businesses operate stores). A decision in favor of the FDI
will allow global mega chains such as Walmart, Carrefour and Tesco to enter
India. The investment is subject to a minimum of US$100mn, of which half should
be in the form of back-end infrastructure such as cold chains, processing and
packaging. In addition, retailers will have to source at least 30% of their
requirements from the micro, small and medium enterprises (MSME) sector.
At present, the organized retail market is estimated to be worth around US$28bn
(around `1.45lakh cr) and could be nine times bigger by 2020. The retail sector
has welcomed the move, as it brings in the much required capital, which will help
the segment expand enormously in the next 3-5 years. In addition, consumers are
likely to be benefited with more choices and better prices. Although the Cabinet
approved the long awaited move, at the ground level the decision will have to be
taken by individual states as retail trade is a state subject and requires all requisite
clearances to come from local authorities.
We believe this move of the government is favorable to companies like Pantaloons
Retail, Shoppers Stop, Koutons Retail and Kewal Kiran Clothing Ltd., as opening of
the floor to foreign players will ensure JVs and flow of investments with local
retailers towards setting up of shops. Also CESC, which has a 94% stake in
Spencer’s Retail, will be benefited from this positive development, thus we maintain
our Buy recommendation on CESC with a target price of `379.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FDI in retail cleared; 50% in multi brand and 100% in single
brand
The Union Cabinet yesterday cleared 50% foreign direct investment (FDI) in multibrand
retail and 100% FDI in single brand retail (under which companies in the
food, lifestyle and sports businesses operate stores). A decision in favor of the FDI
will allow global mega chains such as Walmart, Carrefour and Tesco to enter
India. The investment is subject to a minimum of US$100mn, of which half should
be in the form of back-end infrastructure such as cold chains, processing and
packaging. In addition, retailers will have to source at least 30% of their
requirements from the micro, small and medium enterprises (MSME) sector.
At present, the organized retail market is estimated to be worth around US$28bn
(around `1.45lakh cr) and could be nine times bigger by 2020. The retail sector
has welcomed the move, as it brings in the much required capital, which will help
the segment expand enormously in the next 3-5 years. In addition, consumers are
likely to be benefited with more choices and better prices. Although the Cabinet
approved the long awaited move, at the ground level the decision will have to be
taken by individual states as retail trade is a state subject and requires all requisite
clearances to come from local authorities.
We believe this move of the government is favorable to companies like Pantaloons
Retail, Shoppers Stop, Koutons Retail and Kewal Kiran Clothing Ltd., as opening of
the floor to foreign players will ensure JVs and flow of investments with local
retailers towards setting up of shops. Also CESC, which has a 94% stake in
Spencer’s Retail, will be benefited from this positive development, thus we maintain
our Buy recommendation on CESC with a target price of `379.
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