FDI Policy Restricts Sale for Existing Indian Retailers
Walmart and Tesco are restricted to acquire an existing retailer to make laidback entry to the Indian market. This was clarified by the government last Thursday as they want to make sure that chains are built right from scratch.
The rulings made a big setback for retail groups including Future Retail, Spencer's and Bharti Retail. These firms were hoping to sell at least a part of their stake to foreign companies. One shocked CEO of an Indian retail store, who wished not to be named, exclaimed not being able to do anything as this was the implemented legislation.
On the other hand, the slow start for foreign retailers would mean less competition for Reliance Retail, an Indian-based retailing company. However, this is unlikely for cash-strapped retailers as they do not have the funds to expand quickly and compete in the market.
The FDI policy requires investors to bring amount not lower than US$100 million investment. This should be equally split between the and back end. The policy also implies that the investment has to be new making foreign multi-brand retailer will spend US$50 million in setting up new stores to meet the required front and back ends.