Retail and real estate are the two booming sectors of India in the present times.

And if industry experts are to be

believed, the prospects of both the sectors are mutually dependent on each other. Retail, one of India’s largest
industries, has presently emerged as one of the most dynamic and fast paced industries of our times with several
players entering the market. Accounting for over 10 per cent of the country’s GDP and around eight per cent of the
employment retailing in India is gradually inching its way toward becoming the next boom industry.

As the contemporary retail sector in India is reflected in sprawling shopping centers, multiplex- malls and huge
complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of
format and consumer buying behavior, ushering in a revolution in shopping in India. This has also contributed to large
scale investments in the real estate sector with major national and global players investing in developing the
infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in
India are

 Low share of organized retailing

 Falling real estate prices
 Increase in disposable income and customer aspiration
 Increase in expenditure for luxury items

Another credible factor in the prospects of the retail sector

in India is the increase in the young working population. In
India, hefty pay-packets, nuclear families in urban areas,
along with increasing working-women population and
emerging opportunities in the services sector. These key
factors have been the growth drivers of the organized retail
sector in India which now boast of retailing almost all the
preferences of life - Apparel & Accessories, Appliances,
Electronics, Cosmetics and Toiletries, Home & Office
Products, Travel and Leisure and many more. With this the
retail sector in India is witnessing a rejuvenation as
traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and
specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large
cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the
race. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros
and the remaining 81 in the Tier II cities.  The government of states like Delhi and National Capital Region (NCR) are
very upbeat about permitting the use of land for commercial development thus increasing the availability of land for
retail space; thus making NCR render to 50% of the malls in India.

India is being seen as a potential goldmine for retail

investors from over the world and latest research has rated
India as the top destination for retailers for an attractive
emerging retail market. India’s vast middle class and its
almost untapped retail industry are key attractions for
global retail giants wanting to enter newer markets. Even
though India has well over 5 million retail outlets, the
country sorely lacks anything that can resemble a retailing
industry in the modern sense of the term. This presents
international retailing specialists with a great opportunity.
The organized retail sector is expected to grow stronger
than GDP growth in the next five years driven by changing lifestyles, burgeoning income and favorable demographic
outline.

Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet. The government is now set to
initiate a second wave of reforms in the segment by liberalizing investment norms further. This will not only favor the
retail sector develop in terms of design concept, construction quality and providing modern amenities but will also
help in creating a consumer-friendly environment. Retail industry in India is at the crossroads but the future of the
consumer markets is promising as the market is growing, government policies are becoming more favorable and
emerging technologies are facilitating operations in India. And this upsurge in the retail industry has made India a
promising destination for retail investors and at the same time has impelled investments in the real estate sector. As
foreign investors cautiously test the Indian Markets forinvestments in the retail sector, local companies and joint
ventures are expected to be more advantageously positioned than the purely foreign ones in the evolving India's
organized retailing industry. 

FDI norms in retail sector should be relaxed'

New Delhi: The Government needs to relax norms on foreign direct investment in retail to facilitate fresh infusion of
funds and also promote competition in the sector, which has been hit by the economic slowdown, real estate
consultant CB Richard Ellis has said.

"The existing FDI rules are a constraint. There is need to open up the sector a bit more as it will facilitate fresh
infusion of funds and also promote competition," CB Richard Ellis (CBRE) Chairman and MD (South Asia) Anshuman
Magazine said.

Currently, 100 per cent FDI is allowed in wholesale cash-and-carry business, while in single-brand retailing 51 per
cent FDI is allowed but none in multi-brand retailing.

The Parliamentary Committee on Commerce had earlier this year submitted a report opposing further opening up of
the retail sector for FDI.

However, a report by the Indian Council of Research in International Economic Relation (ICRIER) in 2008, had
mooted liberal FDI norms in the sector saying the sector would grow to USD 590 billion by 2011-12, of which
organised retail would have a share of 16 per cent.

Sharing ICRIER's views, Magazine said: "(Curently) the share of organised retail is still very small in the overall
market and has scope for growth."

SEBI proposes to double retail investment limit

New Delhi: Market regulator SEBI proposed to double the investment limit for retail investors to Rs 2 lakh in public
issues, a move that will enable individuals to aggressively participate in primary issues of companies.

"It is proposed to ... enhance the limit prescribed for defining a retail individual investor in a public issue from the
existing Rs 1 lakh to Rs 2 lakh," the Securities and Exchange Board of India (SEBI) said in a draft regulation on which
it invited comments from stakeholders by September 3.

The current limit of Rs 1 lakh for retail investors was fixed over five years ago in March 2005.

Giving justification for its proposal, SEBI said the limit for retail investors needed to be enhanced in view of the
increase in inflation rate from 4 per cent in 2005 to around 12 per cent currently and rise in the BSE Sensex from
8,000 points to about 18,000 points during the same period.

"This means that the retail individual investors now buy a lesser number of securities with Rs one lakh than they
would buy with the same amount in 2005," it added.
"It is a very timely and logical step. The lukewarm public response to some recent offers may also have made SEBI
put the proposal," SMC Capitals equity head Jagannadham Thunuguntla said.

Allow 100% FDI in multi-brand retail'

New Delhi: Promising to create a strong infrastructure and thousands of jobs in India, French retail major Carrefour
has called for allowing 100 per cent FDI in multi-brand stores, and said that the move would ease inflationary
pressures.

The government has taken a tentative step to open the politically sensitive sector, which employs 34 million people,
to global players with the Department of Industrial Policy and Promotion (DIPP) releasing a discussion paper on the
issue.

"Any cap or restriction on FDI in this sector may result in potential loss of opportunities and avenues of inclusive
growth of the retail sector," Carrefour has said in its suggestions recently to the industry ministry.

It, however, said if the government wants staggered opening of the sector, the FDI cap should be kept such that a
foreign retailer is "entitled to make a minimum of 51 per cent investment with rights to manage the company...".

The firm said each store of 50,000-60,000 sq ft sales area could provide about 200 direct and 250 indirect jobs.

"As per our estimates, if Carrefour starts its retail operations in India, in about 10 years, we would provide direct and
indirect employment opportunities to approximately 20,000 people in the stores itself," the firm said.

While global players like USA's WalMart and German-Metro want the government to completely open the sector to
foreign investments, Indian business chambers like Ficci and Assocham favour calibrated liberalisation.

India allows foreign investment only in single-brand retail, with FDI cap of 51 per cent.

Carrefour said, "(FDI in multi-brand retail) will help in controlling the inflation rate by offering more competitive and
rationalised prices of products to consumers and reduction of wastage across India's farm-to-fork supply chain," it
said.

Inflation in India is hovering at about 10 per cent.

The French firm said that improving supply chain and logistics will enable retailers to enhance overall
competitiveness, decrease the prices offered to consumers and reduce wastage.

Carrefour has plans to built appropriate back-end infrastructure to support the retail operations," it said. The back-end
infrastructure includes contract farming, local sourcing, cold chains and other logistic supports. As per estimates,
India loses fruits and vegetables worth thousands of crore rupees annually due to lack of proper cold chains and
back-end infrastructure.

' India mulls FDI in multi brand retail

Current FDI limit is 51% in single-brand retail, 100% in cash-and-carry stores that can only
sell to other retailers

The government pulled a sensitive item in the reforms agenda out of cold storage on Tuesday, with
the department of industrial policy and promotion (DIPP) releasing a discussion paper on permitting
foreign direct investment (FDI) in multi-brand retail chains such as those run by the likes of Wal-Mart
Stores Inc. and Carrefour SA around the world.
This move is fraught with political risk and comes a day after opposition parties joined hands for
nationwide protests against rising inflation. There have been widespread fears that the entry of global
retail giants could hurtkirana stores that dominate the retail trade in India and employ 33.1 million
people, the most outside farming.

The government has tried to defuse some of these concerns, by suggesting in its discussion paper that
the sector would be opened up to foreign firms in a “calibrated manner”. It has also pitched issues
such as inflation control and employment into the discussion about FDI in multi-brand retail.

It has been suggested in the discussion paper that modern retailers with efficient cold storage chains
could minimize wastage of fresh produce and ease food inflation. India currently lets around Rs1
trillion of fresh produce go waste and more than half of this can be brought to market if the proper
farm-to-fork infrastructure is in place. The department has argued that “FDI in front-end retailing is
imperative” to fund cold storage for farm produce.

Among the other indications that popular concerns are being taken on board, the discussion paper
asks whether half the jobs created by new retail chains should be reserved for rural youth and cites
data from China to show that big-box retailers do not necessarily kill the existing system of mom-and-
pop stores.

Both industry and the stock market welcomed the baby step towards opening up the sector. “The
retail industry in India needs access to more capital. It can definitely go into the investment (for) the
supply chain. But we just cannot build the back-end without an equal amount of development in the
front-end,” said Rakesh Biyani, CEO of Future Group.

Retail stocks rose by as much as 5%. Shares of Pantaloon Retail (India) Ltd ended 4.84% up at Rs441
on the Bombay Stock Exchange. Shares of Shopper’s Stop Ltd rose 2.02% and Trent Ltd, 3.19%. The
exchange’s key index rose 173.04 points, or 0.99%, to 17,614.48.

India currently allows 51% FDI in single-brand retail and 100% in cash-and-carry stores that can only
sell to other retailers and businesses.

Thomas Varghese, CEO of Aditya Birla Retail Ltd, said he is in favour of allowing 49% FDI in multi-
brand retail. “If you are allowing FDI, do it in a calibrated fashion because it is politically sensitive and
link it (with) up some caveat from creating some back-end infrastructure,” he added.

To allay fears about the impact on small retailers once the big boys step in, the discussion paper has
asked whether a Shopping Mall Regulation Act should be put in place to protect them.

“The unfounded fear that large retailer will kill small ones is wrong. There is room for both to grow
over the next foreseeable future,” said Harsh Bahadur, general manager (wholesale) at Tesco
Hindustan Wholesaling Pvt. Ltd. He added that if the government went ahead and allowed FDI, it
would be “good news for the economy”.

Wal-Mart India’s president Raj Jain declined comment on the grounds that he hadn’t read the
discussion paper.

An analyst appreciated the government’s willingness to finally get down to the business-end of
policymaking.
“While there have been ongoing discussions for many years, this is very significant in putting down all
these issues, talking about them very clearly and coming up with issues that we need to resolve,” says
Saloni Nangia, vice-president (retail) at consultancy Technopak Advisors Pvt. Ltd.

Both the Bharatiya Janata Party and the Left parties are opposed to allowing FDI in multi-brand retail.

Wal-Mart ready for multi-branded retailing

if rules eased
“In case the government decides to allow FDI into multi-branded retailing we will be happy
to participate in it. We can set up our chain of stores in a matter of months...a maximum of
one year,” Wal-Mart India president Raj Jain said

New Delhi: The world’s largest retailer, Wal-Mart, on Tuesday said it is ready to enter multi-branded
retail segment in India within a year of any government decision to open up the sector to foreign
direct investment.

“In case the government decides to allow FDI into multi-branded retailing we will be happy to
participate in it. We can set up our chain of stores in a matter of months...a maximum of one year,”
Wal-Mart India president Raj Jain told reporters here.

The Bentonville-based retailing giant’s statement comes in the wake of the Indian government
considering easing norms for FDI in multi-brand retailing in India.

Jain said the company wants the government to liberalise the FDI regime in retail in the country and
has conveyed this to the concerned authorities several times.

“Our supply chain is getting ready. It is difficult to say what the government has in mind but we would
want it to open the multi-brand retail sector (for FDI),” Jain said.

Under current rules, foreign players can hold a maximum of 51% stake in single-brand retail entity,
while FDI in multi-brand segment is prohibited.

Wal-Mart currently operates in India under a 50:50 joint venture with Bharti Enterprises in the cash-
and-carry wholesale segment where 100% FDI in allowed.

The JV, Bharti Walmart Pvt Ltd, has two outlets and plans to expand to 15 stores across the country
within three years.

Jain, who is also the managing director and CEO of the JV company said the cash-and-carry business
in progressing well and on schedule.

Raj Jain | Our model will serve small stores

better
Raj Jain, chief executive of Bharti Wal-Mart Pvt. Ltd, spoke about his plans
ew Delhi: After years of unsuccessful lobbying with the government to open India’s retail market to
foreign investors, US-based Wal-Mart Stores Inc. opened its first wholesale store in Amritsar in May.
Wal-Mart, which has tied up with Bharti Enterprises Ltd for a 50:50 cash-and-carry joint venture,
plans to open up to 15 such stores in three years. Raj Jain, chief executive of Bharti Wal-Mart Pvt.
Ltd, spoke about his plans. Edited excerpts:

How has been the response to your first store in Amritsar?

We are very pleased. It’s better than what we had expected, but not overwhelming.

What have been the surprise learnings?

Road ahead: Bharti Wal-Mart chief executive Raj Jain

says the firm’s supply chain is most under-developed
in India and needs to be worked upon. Harikrishna
Katragadda / Mint

It has taught us a lot of lessons and we are still

learning. So far, the Indian consumers have been
driven a lot by promotional merchandise—one free
on buying one and that kind of stuff. We didn’t want
to do that. We said you buy whenever you want to
buy and you buy it at the lowest prices. Our
customers have been very happy and they are
rewarding us by saying, “Hey, there’s a store where
you can go anytime and get the cheapest prices.” It’s not that there’s a Nestle promotion today and
you can attack the store and that there’ll be no promotional activity tomorrow.

The second thing we are realizing is that although a lot of FMCG (fast-moving consumer goods)
companies such as HUL (Hindustan Unilever Ltd), ITC, Colgate have developed a very evolved
distribution system, the customers (read trade) are still very much under-served. There is a shortage
of products sometimes and some things are not available. The supply chain is very erratic. But we
have been able to supply consistently and at good prices.

How do you manage the supply chain?

It really starts with the suppliers. First is to have an open discussion with the suppliers. The second
thing is having intricate and global IT systems in place, which are able to leverage your planning and
execution. Third, we have a distribution centre we have invested in upfront. We are able to run this
very effectively and we also do a good job of getting the merchandise time and time again to the right
place and getting them to the store and so on. Fourth, we are working with our suppliers who are not
able to meet our deadlines and commitments. I have to say that it has taken some time.

I would bifurcate suppliers into four buckets. There are the multinational suppliers, which are the
Unilevers, the P&Gs of the world, who essentially know what modern retail is. They have not been
geared to cater to modern retail in India and as we work with them, they are raising their standards
and (we’re) getting them to supply to the modern wholesale.

The second are the big local suppliers such as Dabur. They don’t have the international experience,
but have the management and the financial bandwidth to invest and to learn. We are helping them to
invest, so they can see returns on their investments through their sales.
Have they been forthcoming?

Initially they were reluctant, but of late the response has been pretty good. The third set of suppliers
is the regional suppliers. For example, the suppliers from Punjab and Haryana and the pickle makers—
many of them are small or medium size, and they don’t have the financial capacity and the
management bandwidth to invest. There, we are really holding their hand literally from the
management perspective and also from the financial perspective, as much as we can do as our
business grows.

How are you helping them financially, technologically?

We are helping them technologically in setting up best practices. Financially, if they are looking for
investments then we go to the banks and say they are our suppliers so please do fund them for their
expansion plans.

Lastly, there are government cooperatives and suppliers. They tend to be in the areas of dairy and
they tend to be little bit of a challenge. Right now, we are trying to change their way of working.
These are very strong brands and customers want them.

You extend such help only in India or do you do it elsewhere as well?

It happens everywhere. I think our supply chain has been probably the most underdeveloped in India
because there hasn’t been any serious attempt to upgrade that. So the work required is more here.

You just stock about 5,000 stock keeping units (SKUs) in your Best Price Modern Wholesale
store. What are the reasons?

The question is you have to be focused on who your customer is. We have always said in Best Price
our customer is the trade, it’s not the consumer. So a lot of people who tested this model and tried to
make it successful said they are the trade, but they will also buy for their personal consumption. We
are not doing that.

We are only doing it for trade and it’s working for us. In my view, it gives a lot of focus on that 5,000-
6,000 SKUs and we keep working on them, refining the supply chain, refining the prices and refining
what the customers want.

Is there room to tweak the model further?

Absolutely. We will continue to tweak our model for several years to come.

What are the immediate changes?

I think first we have to...open more stores because what (we) have is only one store and a five
months’ experience. So one can only learn that much from there. We have to open more stores and
see if this can be replicated in four or five different geographies.

Second thing is, we are looking at the supply chain itself. What is the total working capital in the
supply chain versus sales. Because a lot of these inefficiencies in our supply chain are resulting in
stocks being very high. Therefore, our overall profitability doesn’t work in the current movement. So,
how do we reduce the working capital and yet reach the efficiency level.
Are you still looking at 15 cash-and-carry stores in the next three years or are you planning
more?

We have said that we would do anywhere between 10 and 12 (wholesale stores) in the next two to
three years. So we can accelerate our programme more than we thought originally.

As we go ahead and as the customers continue to favour us, maybe we can look at increasing the
number of stores. Based on the experience of one store, it’s difficult to say whether it’s going to be 15
or 25 outlets. The initial response has been good. The trade in this country is under-served from the
availability, assortment and pricing point of view and, therefore, there is a role for this cash-and-carry
format.

Will Wal-Mart continue to do cash-and-carry business even if India allows foreign direct
investment in multi-brand retailing?

Based on our one-store experience, I would say yes. There is a place for both organized retail and
organized cash-and-carry for trade.

And the beauty of the model lies in the end—the organized cash-and-carry will serve the existing retail
trade to be competitive with the organized trade. That’s how the government needs to look at (it)
because, I think, both can play a significant role. The small kiranas (small stores) will be better
serviced by the cash-and-carry than by the traditional wholesalers.

What percentage of your SKUs are skewed towards the ‘kiranas’?

I would say 70% of our SKUs are only for kiranas, and the balance is for offices, institutions and
restaurants. Large chunk is for kiranas and resellers.

Tesco to open its first cash & carry outlet in

India
The company already has presence in India through a joint venture with Tatas. These stores
are located in Mumbai, Bengaluru, Ahmedabad and Chennai

London: “Tesco, the third largest retailer in the world, is planning to open its first wholesale Cash &
Carry outlet in India this year,” Tesco International and internal communications director Greg Sage
said.

“We will open our first wholesale Cash & Carry outlet in India this year,” Greg said.

Tesco already has presence in India through a joint venture with Tatas. These stores are located in
Mumbai, Bengaluru, Ahmedabad and Chennai.

Greg said: “We see a huge opportunity for future growth in India.”

Corporate and legal affairs director and Tesco board member Lucy Neville-Rolfe said that Tesco
operated 4,331 stores worldwide and employed 470,000 people in 14 countries.
Besides India, the other international markets were the UK retail giant Tesco has presence include
Thailand, Poland, Hungary, South Korea, China, Ireland, Malaysia, Slovakia, Turkey, Japan and the
US.

“We continue to expand our international business and are investing in banking, mobile phones and
other retail services,” he said.

“Each of Tesco’s international businesses also has a community plan, which include initiatives to help
consumers to be green and meet our commitment to be a zero-carbon business by 2050,” he added

Opening up India retail? Don’t hold your

breath
Opening $450 bn retail market to FDI is political hot potato; Govt, eyeing state elections,
wants to keep populist appeal; value of India retail grew least among Bric markets in 2003-
08

Mumbai: Plans by Carrefour, the world’s No.2 retailer, to open its first cash-and-carry outlets in India
are a sign of optimism in the country’s $450 billion retail sector, but foreign investors and some
officials want more -- an easing of the country’s tough investment rules.

Just days before Carrefour’s announcement, Africa’s Shoprite Holdings said it may quit India because
restrictive foreign investment laws have hamstrung its growth, highlighting the many hurdles for
foreign retailers.

India’s retail industry is among the fastest growing in the world, but it remains heavily regulated, with
strict limits on foreign investment. Even big local retailers face opposition in some states amid claims
they cause massive job losses.

Some foreign firms had expected the re-election last year of a Congress-led government would open
up retail to outside investment as it was no longer held back by communist allies who say such a
move would hurt farmers and traders.

Analysts say opening up retail to foreign direct investment (FDI) may help bridge a yawning fiscal
deficit, rein in food price inflation by curbing waste and create thousands of jobs.

But the move is a political hot potato and is off the table, as the Left-leaning government eyes
upcoming state elections and does not want to dent its populist appeal.

“The government is not talking about FDI in retail at all,” said Seema Desai, analyst at risk
consultancy Eurasia in London.

“It’s not just the impact on kirana (small) stores, but also the impact on middlemen and wholesalers
who are politically very powerful ... (and) the political backlash from within the party and the
opposition. So the government will tread carefully.”

“I don’t expect we will see any major moves towards retail FDI in the next year or so. It will happen in
a phased manner.”
Waiting Game

Organised or branded retail makes up just over 5% of the total Indian market, but is estimated to be
growing at more than 20% a year.

For years, Indian shoppers bought rice and soap in tiny neighbourhood shops lacking freezers and
well-stocked shelves, but who would often sell on credit and deliver at home for free.

Rapid economic growth, forecast at 7.2% in the year to 31 March, and rising incomes in Asia’s third-
largest economy have drawn global retailers looking to offset sluggish home markets.

But foreign retailers have long been frustrated by Indian rules which permit single-brand foreign
retailers to take up to 51% in a local venture, and limit multiple-brand retailers to franchise, licence
and wholesale cash-and-carry operations.

Marks and Spencer has a venture with Reliance Retail for apparel and homeware, while Tesco has
partnered the Tata Group for cash-and-carry outlets. Germany’s Metro also operates wholesale
centres.

Shortly after the Congress-led alliance sealed its election victory last year, top retailer Wal-Mart Stores
Inc said it was opening its first cash-and-carry centre in India, a move seen as signalling renewed
investor confidence in the government.

But the trade minister has since said he saw no need for further liberalization in retail, while a Bill to
raise FDI in insurance is languishing, and moves to raise foreign ownership in banks and open up the
pension sector have also stalled.

“There is no economic argument against modernization of retail; there is a political argument. And
that is a concern about India,” said Ira Kalish, director of global economics and consumer business at
Deloitte Research.

“And there are still substantial opportunities in other emerging markets like China, Brazil and Russia
where either governments are more welcoming or consumer spend is high.”

The value of Indian retail grew the least of the Bric markets from 2003-08, according to research firm
Euromonitor.

While Carrefour and Wal-Mart have continued expanding in China even through the downturn,
Starbucks and IKEA have put their plans for India on ice, and Shoprite is ready to exit.

Until the government “frees up retail” Shoprite, which has one wholesale outlet, would not be able to
open more outlets to derive economies of scale, and its business “cannot achieve breakeven results”,
it said in its annual report recently.

Torn

Some analysts say this does not augur a mass retailer exodus.

“Look at Wal-Mart, Metro, Tesco -- they’re all expanding,” said Arvind Singhal, chairman of
consultancy Technopak Advisors.
“We tend to forget just how many foreign retailers are doing well in India, from Reebok and
McDonald’s to Louis Vuitton.”

But while there is some support for opening up retail even within the government, it is unlikely to
happen soon, said Montek Singh Ahluwalia, deputy chairman of the Planning Commission.

“I think there is a case for relaxing that (FDI), but there’s no proposal before the government at
present to do so (and) I can’t say it’s bound to happen as of now,” he told Reuters.

Still, recent reform in areas such as allowing retailers to procure directly from farmers, and moves to
improve infrastructure, ease trade between states and introduce a simpler tax system have all
cheered foreign retailers in the country.

Others including UK’s John Lewis are keen to enter.

But they remain cautious about their prospects, Kalish said.

“They are a bit torn: they see the opportunity, but there is some concern about making a go of it in
India now,” he said.

Bharti-Walmart seeks clarity on new

wholesale trade FDI rules
The Department of Industrial Policy and Promotion, while issuing a single document on FDI
rules, had put a cap of 25% on sales of cash-and-carry players to front-end retail
companies owned by their Indian joint venture partners

Chandigarh: Faced with the possibility of changing India plans due to a recent change in FDI norms,
Bharti-Walmart on Tuesday said it has sought clarifications from the government on caps imposed on
sales by cash-and-carry players to their group’s front-end companies.

“The new norms have only just been announced. There is still lack of clarity on them. We have asked
the government to clarify certain points like what exactly is 25% of total sales and what exactly are
group companies,” Bharti Walmart managing director and CEO Raj Jain, who is also Walmart India
president said.

Bharti Walmart is a 50:50 joint venture set up in 2007 between Bharti Enterprises and Walmart and is
engaged in wholesale cash and carry trade. It supplies to Bharti Enterprises’ front-end retailing arm,
Bharti Retail that runs ‘Easy Day’ stores.

Earlier this month, the Department of Industrial Policy and Promotion (DIPP), while issuing a single
document on FDI rules, had put a cap of 25% on sales of cash-and-carry players to front-end retail
companies owned by their Indian joint venture partners.

As per the DIPP rule, wholesale trade of goods would be permitted among companies of the same
group. However, such wholesale trade to group companies taken together should not exceed 25% of
the total turnover of the wholesale venture and the wholesale made to the group companies should be
for their internal use only.
When asked what could be the implications of the new rule on the India plans of Bharti-Walmart, Jain
said it is premature to comment without clarity.

“Till the time some clarity does not emerge, it would not be appropriate for us to comment,” he said.

According to consultancy firm KPMG, the new rules could force the wholesale companies to revisit
India plans. It could make firms, such as Bharti Walmart, Tata Tesco and Metro AG to reduce their
investment plans by around Rs800 crore in the immediate term and the long-term impact will be
much higher.

Carrefour announces first wholesale outlet in

India
Carrefour is exploring options to enter into a partnership with an Indian firm to sell directly
to consumers

New Delhi: French retailer Carrefour SA is exploring options to enter into a partnership with an Indian
firm to sell directly to consumers.

“We are open to a partnership and in the next few months we will identify a partner, and it will then
be announced by our global headquarters,” Jean Noel Bironneau, managing director for Carrefour in
India said, without elaborating.

In store: Carrefour India managing director Jean

Noel Bironneau says the firm will finalize an Indian
partner in a few months. Pradeep Gaur/Mint

The company will open its first wholesale store in

Seelampur in Delhi by the end of next month, it told
the media on Tuesday.

India allows 100% foreign ownership in the domestic

retail sector if a company only establishes wholesale,
or cash-and-carry stores.

Carrefour will enter the wholesale space already

occupied by Wal-Mart Stores Inc. and Germany’s Metro AG to get a toehold in India’s $400 billion
(around Rs18 trillion) annual retail market that’s growing at 25%-35% a year.

Mint had reported earlier that Carrefour plans to open its first store in Seelampur by June-end.

The French retailer has forged an alliance with Future Group that operates India’s largest network of
branded stores including the Big Bazaar and Pantaloon chains, two people close to the development
had said on condition of anonymity.

Future Group is planning to open anywhere between 150 and 300 Carrefour-branded franchisee
hypermarkets, and the Indian company will pay a royalty to the French retailer, according to one of
the two people.
Carrefour will fully own its cash-and-carry venture and not have a local partner, Bironneau said.

Carrefour’s rival Wal-Mart has partnered with India’s Bharti Enterprises Ltd in a 50:50 joint venture for
its wholesale business.

The 60,000 sq. ft Seelampur store will stock nearly 30,000 product categories. When it opens, the
Seelampur store will be Delhi’s first branded wholesale store from a modern retailer. Metro has five
cash-and-carry outlets in Bangalore, Hyderabad, Kolkata and Mumbai, while Wal-Mart operates two
such stores in Punjab.

Wal-Mart steps up India rollout, hopes rules

ease
Food price inflation and the need for food security should spur the government to open the
sector to foreign direct investment, says Raj Jain, chief of Indian operations, Wal-Mart

New Delhi: Wal-Mart Stores Inc, the world’s biggest retailer, will accelerate its rollout of wholesale
stores in India, a crucial growth market that has long frustrated overseas operators with restrictive
rules.

Raj Jain, chief of Indian operations for Arkansas-based Wal-Mart, said the firm now expects to open
10-12 wholesale centres in India over two-to-three years, from an earlier target of five years, as real
estate prices have become more attractive and it gains confidence in operating in the country.

Food price inflation and the need for food security should spur the government to open the sector to
foreign direct investment (FDI), he added.

”We will quicken the pace of expansion,” Jain said in a late Tuesday interview at his offices in
Gurgaon, a fast-rising suburb of New Delhi that houses a host of multi-nationals.

”We have more confidence in running the stores, we feel more confident about real estate compared
to two years ago,” he said.

Retail rents fell by 30-40% from late 2007 peaks.

Wal-Mart currently runs wholesale operations in India in an equal partnership with India’s Bharti
Enterprises.

India’s $450 billion retail sector is dominated by small local operators, a powerful constituency that
has stood in the way of foreign multi-brand players such as Wal-Mart and No.2 Carrefour being
allowed to operate their own retail stores.

Instead, foreign players must operate through franchise tie-ups with local partners or operate cash-
and-carry, or wholesale, outlets of the kind Wal-Mart is rolling out.

While the government is yet to liberalise rules for foreign retailers in India, Jain said India has moved
beyond the question of whether or not organised retail is positive for the country.
”Everyone realises this country needs organised retail and that it won’t overnight replace mom-and-
pop stores,” he said, sitting at a conference table adorned by a small shopping trolley filled with
candy.

Food inflation is a nagging problem in India, eating into disposable incomes and prompting political
protests. Some 40% of fresh produce in India, which has a population in excess of 1.2 billion, is
wasted due to inadequate supply chains and lack of cold storage.

Jain said opening retail to foreign investment would enhance food distribution and security, which the
government realises.

”Now it’s a question of having the political will and the timing of the decision,” he said.

”I think the current government is focused on having a more open debate and the food inflation
makes people understand that even when there is a good monsoon, food security and food distribution
are serious issues. And so this is one of the levers the government is willing to use,” Jain said.

Big, untapped market

India’s potential for retailers is massive. With a 300 million-strong middle class and an economy set to
grow at 8.5% this year, disposable incomes are rising quickly. Sales of cars and mobile phones are
booming.

But even in wealthy neighbourhoods of big cities, Indian shoppers are accustomed to buying rice and
soap from tiny neighbourhood shacks that lack freezers and well-stocked shelves but often sell on
credit and deliver at home for free.

Real estate consultant Knight Frank said in a report this week that organised retail in India would grow
to around 11% of the industry total by 2013 from 6% now.

Organised retail is growing at an estimated 20% a year in India, which has also lured rivals such as
Germany’s Metro and Carrefour of France, which this week said it will soon open its first cash-and-
carry outlet in the country and unveil a local franchise partner.

Cost-cutter

Wal-Mart is legendary for driving down costs, which keeps prices low but also crowds smaller
operators out of business, making it a magnet for criticism even in its home market.

Its model has not thrived everywhere. In 2006 it pulled out of Germany and South Korea amid stiff
competition and poor performance.

Jain said Wal-Mart is stepping up direct sourcing in India, where it now procures 35-40% of produce
directly from farmers, and is tapping regional suppliers such as dairy cooperatives to increase
efficiencies in a fragmented market.

”The supply chain is one of the big challenges: maintaining quality, ensuring commitments are kept,”
Jain said.
Wal-Mart recently opened its second wholesale outlet in Chandigarh, and will open its next wholesale
centres in Rajasthan, Madhya Pradesh and Hyderabad, he said.

Wal-Mart in trouble over Best Price brand

name
The registrar’s office had cited an application from Aditya Birla Retail to trademark Best
Price for retailing, allied biz

New Delhi: US-based Wal-Mart Stores Inc. has run into trouble with the trademark office over the
branding of its wholesale stores in India.

The world’s largest retailer, which operates in the country through Bharti-Walmart Pvt. Ltd, a 50:50
joint venture with Bharti Enterprises Ltd, chose to avoid its global brands such as Walmart and Sam’s
Club, opting for Best Price Modern Wholesale instead.

But in June, the registrar of trademarks wrote to Bharti-Walmart’s law firm, Anand and Anand, saying
it had found “similar” trademarks in its records. It asked the firm to respond in a month.

A Bharti-Walmart spokesperson said this was a routine query. “There is no objection to the Best Price
Modern Wholesale logo. As a process, the trademark registry flags certain points of observation for
clarification, to which we have sent our response,” said the spokesperson in an email, but declined to
give details of its response.

Neil Mason, a trademark lawyer, also said the trademark office’s remarks are part of a process
followed in many other cases.

In its letter, the registrar’s office had cited an application from Aditya Birla Retail Ltd to trademark
Best Price for retailing and allied businesses. Aditya Birla Retail declined to comment, citing the
sensitivity of the issue.

Bharti-Walmart rolled out its first cash-and-carry store in Amritsar in May 2009, and added another
outlet near Chandigarh this year. The company plans to open 15 wholesale stores in the next three
years.

Five months before launching the first store, Bharti-Walmart made half a dozen applications to
trademark Best Price Cash and Carry and Best Price Modern Wholesale, among other names, along
with the logo. While opening the Amritsar store, Bharti-Walmart officials said the brand was chosen
after a consumer study. But analysts say Wal-Mart was deliberately playing down its global brands to
weaken the backlash against the entry of foreign retailers in India.

“That’s is one of the key reasons that they don’t want to use the Walmart name, presumably to keep a
low profile and not to attract any adverse interest,” said a retail analyst, asking not to be named as he
does business with Bharti Walmart. “It’s an over-cautious way to go, but there is no harm in it.”

Small shopkeepers, who have traditionally dominated India’s retail sector, have been protesting for
years against the entry of big business groups—such as Wal-Mart—in the sector. They have staged
marches and ransacked stores owned by large corporations in several cities.
Raymond to expand capacity, retail reach
Plans to add around 100 franchise outlets this year; Raymond shirtingfabrics JV to add 10
mn metres per annum; closes unprofitable stores,consolidates to turn corner

Mumbai: Textiles maker and retailer Raymond Ltd plans to add about 100 retail outlets this fiscal as
domestic consumer sentiment turns buoyant, though demand from some developed economies have
not matched expectations, a senior official said.

“Going forward, looking at the feedback we have received from the trade and our own internal studies,
consumer sentiment will remain buoyant and this season is looking quite good,” chief financial officer
H Sunder told Reuters on Wednesday.

“The winter season where we are taking in growth in excess of 17-18% in terms of bookings, we
expect the optimism to continue,” Sunder said.

Raymond plans to open up to three-fourths of the new stores in non-metros and class IV and V towns
through franchise, in line with its strategy of cementing its footing in India’s hinterland. Class IV and V
towns typically have a population of 500,000 or less. Raymond, which currently occupies a retail space
of around 1.4 million square feet, hopes to add 150,000-175,000 square feet through the new outlets.

Raymond also plans a Rs400 million expansion of its shirting fabrics joint venture with Italy’s Gruppo
Zambaiti, boosting capacity by 10 million metres a year at its Kohlapur unit to 22 million metres.

India’s textiles and apparel industry is fast recovering after a near two-year slowdown that hit
consumer sentiment and discretionary spending.

However developed markets particularly Europe and US have not yet overcome the slowdown.

“The demand pick-up is not as robust as expected except in denims, where we have been able to pass
on price increases.”

Raymond, which sells brands such as Manzoni, Park Avenue, Parx and ColorPlus, closed several
unprofitable stores last fiscal and in June folded up its home retail brand, Be:Home, after two years of
operation.

Raymond swung to a standalone net profit of Rs25.06 crore in FY10 from a year-ago net loss of Rs270
crore, while its June-quarter net loss narrowed to Rs24.88 crore from Rs31.60 crore.

The firm is in the process of setting up a gas-based captive power plant at Vapi in Gujarat to reduce
costs and increase profitability.

“We are hoping to have a much better performance than the previous 2 years.

Internally we are ready to deliver on expectations so hopefully we should turn the corner this year”.

However rising raw material costs, particularly cotton, remains a concern and the firm would look to
pass on some of the price increases.
“We have started to pass on price increases. But there is always a time lag, so it does impact margins
in the short run.”

At 1:30 p.m., Raymond shares were down 0.43% at Rs231 in a firm Mumbai market.

Are new FDI norms for better or worse?

The new twist and turn in policy has put most of the major business houses in a sticky situation.
The recent FDI policy has caused furor among the big players in the retail segment who have already floated
JVs with international wholesalers or who are mulling over such a plan.
 
Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry on March
31 came up with a new policy on Foreign Direct Investment (FDI)). The new twist and turn in policy has
put most of the major business houses in a sticky situation.  The recent guideline has stated that the FDI
in wholesale retail does not permit cash & carry retailers to exceed sales more than 25 per cent of its
turnover to its partner retailer. This is for the first time that the industrial ministry has come up with such
guidelines for wholesale trade, otherwise known as cash & carry trade. Cash & carry companies are
asked to maintain daily sales records which will include registration or license details of buyers.
Does the policy pull back foreign investors?
India’s retail sector has been creating its own niche quite successfully, and considering its growth and
stability in economy, it has become the cynosure for foreign eyes. With many foreign players making
investment and inroads into the market, the new cap on FDI has triggered a lot of reactions, uncertainty
and clamour in the retail industry. The tie-ups between Bharti-Retail and WalMart, Tesco and Woolworth’s
joint venture with big retailers Trent and Infinity Retail respectively have received a jolt after the
government’s ruling. So long these tie-ups have ensured majority of the cash & carry sales to the big
retail chains, which now comes to a halt with the new FDI policy. It poses a big threat to the participation
of international wholesale retailers in the country’s retail development. There is a fear that initial
enthusiasm might fade in spite of 100 per cent FDI permission in wholesale trading. 
The reaction in the industry
Bharti Wal-Mart and Metro Cash & Carry are among leading firms involved in wholesale trade in India.
India’s big business houses are at crossroads with the current norms, seeking more clarity on the matter.
It has compelled them to stall or put on hold with their plans which could have bearing on their
businesses. India’s largest retailer, Kishore Biyani, has a plan to forge an alliance with wholesale trading
company, Carrefour. But, as the situation demands, he is considering a major modification of the plan, for
the venture seems to be a far cry to hope for a bright future. The spokesperson for Pantaloons Retail,
promoted by Kishore Biyani, declined to comment on this government policy. “We are in the process of
reviewing and understanding the new consolidated guidelines”, comments the spokesperson for Bharti
Retail.
 
What will be the consequence?
Justifying the government’s role in drafting this new policy, a government official comments that this is an
attempt to stop foreign traders from grabbing a huge share of front-end retail pie, in the name of
wholesale trading. However, apprehension and confusion have gripped the wholesale trading fraternity.
They are in the midst of understanding the whole process. Time will tell if it is a dampener or facilitator of
retail growth.
Govt Expected to Relax FDI Norms in Retail Sector
Published by Newsroom June 11th, 2010 in Newsbytes.

The Government is soon expected to come out with a concept paper on the retail sector that would

particularly look at relaxing FDI norms in this sector. There are still doubts on whether this is a move

to relax FDI norms or just another forum to reiterate what has been repeatedly said, ‘no further

liberalisation in retail’.

India’s FDI regime in the retail sector is constantly under the review of the Government. It has

maintained a restrictive stance in the retail policy despite the popular belief among policy makers that

single-brand retail is doing well in India.

Foreign investments in this sector have been increasing consistently and have been less susceptible to

external shocks. However, will the popular belief be put on paper this time?

FDI on the growth path

In 2006, the Government for the first time eased retail policy in the country by allowing up to 51 per

cent FDI through the single-brand retail route. Since then, there has been a steady increase in FDI in

the retail sector; the sector’s share in total FDI flows into India have increased from zero to 0.2 per

cent in a two-year period. The cumulative FDI in single-brand retail stood at $190 million in February

2010.

FDI data since 2007 demonstrates a steadily rising trend in the single-brand retail sector. Besides,

there has been less volatility in FDI flows even during periods of world-wide recession. The retail

policy relaxation was followed by a series of doubts about the sustainability of FDI in the retail sector.

Moreover, the global slowdown that adversely affected demand in most economies raised concerns

regarding the flight of capital from the Indian retail sector.

Contrary to the belief, foreign investment in the single-brand retail sector in India has been resilient to

external shock. Given its large population and rapidly expanding middle-class, there is growing

demand and a market for almost everything in the country. As a result, when most countries were

facing a demand crunch, foreign brands rushed in to invest in the Indian market, illustrated by a clear

peak in FDI during mid-2008, in the accompanying figure.

From 2006 to March 2010, around 94 foreign players applied to invest through the single-brand route,

of which 57 entities got approval. The percentage increase in FDI flows in the retail sector over the

last two years has been higher than that in sectors such as the services sector, trading and

telecommunications, which have a much higher share in the country’s overall FDI.

Moreover, direct investment, which is the key source of foreign capital in the retail sector, is less

volatile than equity or institutional investment. As a result, there is a lower risk of the market being

affected by the adverse effects of stock market changes and consumer confidence. According to a

2010 A.T. Kearney report, India ranks third after China and the US on the FDI Confidence Index while

it is the top location for non-financial investment. The study found that if the Indian retail sector

becomes more open in future, it could become a vital, high potential market like China.

Foreign investors in China are lured by the increased domestic demand and high potential for retailers,

contributing to overall growth in China. In addition to this, foreign retailers in China have increased

their sourcing from Chinese SMEs, which now have a 70 per cent share in exports. Over the past few

years, the retail sector in India has been successful in attracting and retaining foreign investment. The

Indian market is emerging as an attractive destination for foreign investors interested in investing in

the retail sector. In such a scenario, given the forthcoming opportunities, policy restrictions would not

be the best way to protect traditional retailers.

The Government should, in turn, impose regulations such as sourcing requirements, zoning

regulations and back-end investment requirements to protect traditional retailers. This could, in fact,

help in SME sourcing from India, as in the case of China. In countries such as China, the retail sector

has been a major propellant of growth and with a more liberal FDI policy, the story can be repeated in

India.

Retail stocks soar as Govt unveils FDI plans

McKinsey says India's retail space set to grow to $450 b.
Our Bureau

Mumbai, July 7

Shares of multi-retail firms soared on Wednesday after the Government's plans to consider FDI investments in the
organised retail space.

Some multi-retail stocks even touched their highs on a day when the benchmark indices fell.

The Ministry, in a discussion paper on Wednesday, said: “…keeping in view the large requirement of funds for back-
end infrastructure, there is a case for opening up of the retail sector to foreign investment.”

Trent, the retail operations arm of the Tatas which runs the lifestyle chain Westside, sky-rocketed more than 7 per
cent to close at Rs 1,128.85 on the BSE. During the day it jumped to an all-time high of Rs 1,135.

Pantaloon Retail rose 5.36 per cent to close at Rs 464.6 touching its 52-week high of Rs 469.95 in intraday trade.
Shoppers Stop, too, touched a 52-week high of Rs 658. It closed up 11.54 per cent at Rs 626.15 on Wednesday.

The movement of these stocks was in contrast to that of the market as a whole; the Sensex was down 143 points
(0.81 per cent) to close at 17471 on Wednesday.

FDI is not allowed in the multi-brand retail space. In the single brand space, FDI is allowed up to 51 per cent. In the
cash and carry segment, FDI of 100 per cent is permitted.

According to the ninth annual Global Retail Development Index study from management consulting firm A.T.
Kearney, India is among the top 10 countries on the index's 2010 mix. “India, last year's top GRDI destination, fell to
third. Retail growth will continue in India, but an influx of foreign players, limited and expensive desirable real estate
and foreign investment restrictions have pushed the country's retail market closer to maturity.” India was number one
in 2009.
A recent McKinsey report said that India's retail space is set to grow to $450 billion by 2015, comparable to Italy's
$462 billion market. “The game here has just begun, with organised retail accounting for just 5 per cent of today's
market and likely to expand anywhere between 14 and 18 per cent by 2015.”

“There are positives to this move (the government discussion paper) as a lot of foreign players are waiting on the
sidelines for the FDI rules to come through. And many of them are looking at India with the long term in view,” said Mr
Viraj Nadkarni, Research Analyst at Angel Broking. As the concept paper points out that it has been written keeping
in mind the need to protect the smaller kirana shops or unorganised sector, bringing in FDI into the space will not
harm them either, said Mr Nadkarni.

“The jump in the share price of retail companies was a sentimental push following news of the concept paper,” said
Mr Nadkarni.

There is a huge potential for FDI in Indian retail, said Mr Amit Khurana, Head of Research at Dolat Capital Market. “A
lot of foreign players will jump to it once the FDI norms come out. Wal-Mart has already tied up with an Indian player.
Carrefour and other such retailers are testing the waters here. Home Depot has also shown interest here.”

New framework for FDI in retail

Circular 1, effective April 1, supersedes all the previous guidelines and press notes relating to FDI, issued by the
Government.

Ravi Shingari

Just back from first frenzied shopping experience in the UK, my four year old ever-inquisitive daughter inquired,
“Daddy, why do we not have a Harrods in Delhi? Shopping there is so much fun!” Simple question for a four-year-old,
but not so simple for her father to explain.

Retail in India has remained a point of academic discussion for several years.

The recently released consolidated policy framework for foreign direct investment (FDI) in India is undoubtedly a
respectable effort of the Indian government to promote FDI through a policy framework that is transparent,
predictable and simple, thus reducing regulatory burden.

This document (Circular 1 of 2010) now consolidates all existing regulations relating to FDI contained in the Foreign
Exchange Management Act (FEMA), the Reserve Bank of India (RBI) Circulars under FEMA and various Press Notes
issued by the Department of Industrial Policy & Promotion (DIPP). This new Circular, effective April 1, 2010,
supersedes all the previous guidelines and press notes relating to FDI, issued by the government. It is envisaged that
this Circular will be updated every six months, thus liable to be superseded on September 30, 2010.

FDI in multi-brand retail

Returning to our discussion on FDI in retail, as per the current regulatory regime, retail trading (except under single-
brand product retailing — FDI up to 51 per cent, under the Government route) is prohibited in India. Simply put, for a
company to be able to get foreign funding, products sold by it to the general public should only be of a ‘single-brand';
this condition being in addition to a few other conditions to be adhered to. That explains why we do not have a
Harrods in Delhi. Additionally, the Circular explains that the aim of opening FDI in single-brand retail is to attract
investments in production and marketing, improving the availability of such goods for the consumer and encouraging
increased sourcing of goods from India, among others.

The plausible question one would be tempted to ask at this stage is that would these objectives not be better
achieved by opening FDI in multi-brand retail also?

Interestingly, as per popular news items, DIPP will soon come up with concept papers on relaxing norms for FDI in
multi-brand retail. The paper may include a provision that global retailers interested in opening multi-brand stores in
the country will have to put in a significant part of their investment in the back-end infrastructure.
As per the extant regulatory policy, FDI up to 100 per cent is allowed under cash and carry wholesale trading.

The term ‘cash and carry wholesale trading' was not defined earlier. The Circular now defines it as “sale of
goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other
wholesalers and related subordinated service providers”. Thus this kind of sales is for the purpose of trade, business
and profession, as opposed to sales for the purpose of personal consumption.

Wholesale trading

Further, the Circular wisely suggests that the yardstick to determine whether the sale is wholesale or not would be the
type of customers to whom the sale is made and not the size and volume of sales.

As per the ‘cash and carry' structure commonly employed in India, the wholesale and retail entities are maintained as
separate entities without any cross-shareholdings. The retail entity is owned and controlled by the Indian partner
while the wholesale entity can be owned by the foreign partner up to 100 per cent. The association between the
wholesale and retail entity can then operate on a number of exclusive arrangements. At this stage it is also worth
noting that an additional condition has been specified in the Circular that seems to be raising everyone's eyebrows.

The condition spells that though wholesale trading of goods would be permitted among companies of the ‘same
group', however, such wholesale trading to group companies taken together should not exceed 25 per cent of the
total turnover of the wholesale venture and the wholesale made to the group companies should be for their internal
use only.

Further, the term ‘group company' has not been defined in the said Circular. Further clarification on the meaning of
‘group company' is much awaited by the market players.

Govt opens debate on FDI in multi-brand retail

Releases discussion paper for stakeholders' response.

Our Bureau

New Delhi, July 6

Braving all political odds, the Government, on Tuesday, took the first step towards opening up foreign direct
investment in multi-brand retail.

Advocating that FDI in retail would bolster farmers' income, tame inflation and bring technical knowhow, the
Government has kicked off a discussion to formulate the rules of the game, including imposition of FDI cap and riders
for local sourcing and rural job creation.

The move was eagerly awaited by foreign players such as Carrefour, Wal-Mart, and Woolworths, that have been
angling for a larger play in the market. Even domestic retailers such as Future Group and Aditya Birla Retail have
been lobbying hard for FDI in the sector.
While foreign investment in multi-brand retail is prohibited now, the Government allows 51 per cent FDI in single
brand retail and 100 per cent in wholesale cash-and-carry trade.

“Keeping in view the large requirement of funds for back-end infrastructure, there is a case for opening up of retail
sector to foreign investment. At the same time, there is a view that this may be more appropriately done, in a
calibrated manner,” the Department of Industrial Policy and Promotion (DIPP) said in its discussion paper on the
controversial issue, which has, in the past, triggered widespread resistance from political parties such as the BJP and
the Left.

Detractors have been arguing that such a move could hit the fortunes of 1.3 crore small retailers across the country.

Interestingly, Tuesday's discussion paper has not recommended a specific FDI ceiling; it has, instead, sought public
opinion on the same.

“It appears that the Government is under pressure from MNC retailers to open up the sector. We also have been
demanding opening up of multi-brand retail to step up investment in back-end and front-end. If the Government does
it in a calibrated and graded manner, it would be a welcome step,” said Mr Thomas Varghese, Chief Operating
Officer, of Aditya Birla Retail and Chairman, CII Committee on Retail.

However, he rued that the concept paper, though comprehensive, has not spelt out a clear direction for FII portfolio
investment in retail – which is what many domestic retailers have been clamouring for.

The discussion paper talks of earmarking 50 per cent of FDI inflows for building up of back-end infrastructure,
logistics and agro processing; and even moots riders such as reserving 50 per cent jobs in FDI-funded retail outlets
for rural youth.

Other issues up for debate include identifying possible locations for such stores. The current thinking is that these
stores could initially be allowed to come up in cities with population of over 10 lakh, particularly on the outskirts. Also,
to provide a fillip to the SME sector, the Centre has recommended sourcing a percentage of manufactured products
from the domestic SMEs. Over the last few years, foreign investment in retail has been a politically sensitive issue.
Concerns that foreign retailers, with their financial prowess, could rob the kirana stores and pushcart vendors of their
livelihoods, meant that the Government had to tread cautiously on the issue.

Last year, a Parliamentary Standing Committee headed by BJP's Dr Murli Manohar Joshi had sought a blanket ban
on large corporate houses and MNC retailers entering the trade.

However, earlier this year, the Prime Minister, Dr Manmohan Singh, called for a debate on the opening up of the
sector, pointing to the vast difference between farm gate and consumer prices.

On similar lines, the DIPP's discussion paper points out that the farmers get just a third of the total price paid by the
final consumer, as against two-thirds realised by farmers in nations with a higher share of organised retail. FDI in
retail, therefore, could be an efficient way of addressing concerns of farmers and consumers, it said.

“Allowing FDI in multi-brand retail in India is a step in the right direction…The FDI percentage could be between 49-
51 per cent based on all considerations and the conditions should not be too onerous,” said Mr Rajan Bharti Mittal,
President of FICCI and Vice-Chairman of Bharti Enterprises, which has a joint venture with Wal-Mart.

The Indian retail industry is the fifth largest in the world. The organised retail segment in India accounts for less than
five per cent of the total retail market, but it is expected to grow at a compounded annual rate of 40 per cent to $75
billion by 2015, from less than $20 billion now, according to estimates by various brokerage reports.

Retail investment in India gung ho!

India's FDI regime, its impact on the retail sector and more….

India's FDI regime in retail is constantly under the review of the Government. It has maintained a restrictive stance in
the retail policy despite the popular belief among policy makers that single-brand retail is doing well in India.
Tanu Goyal

The Government is soon expected to come out with a concept paper on the retail sector that would particularly look at
relaxing FDI norms in this sector. There are still doubts on whether this is a move to relax FDI norms or just another
forum to reiterate what has been repeatedly said, ‘no further liberalisation in retail'.

India's FDI regime in the retail sector is constantly under the review of the Government. It has maintained a restrictive
stance in the retail policy despite the popular belief among policy makers that single-brand retail is doing well in India.

Foreign investments in this sector have been increasing consistently and have been less susceptible to external
shocks. However, will the popular belief be put on paper this time?

FDI on the growth path

In 2006, the Government for the first time eased retail policy in the country by allowing up to 51 per cent FDI through
the single-brand retail route. Since then, there has been a steady increase in FDI in the retail sector; the sector's
share in total FDI flows into India have increased from zero to 0.2 per cent in a two-year period. The cumulative FDI
in single-brand retail stood at $190 million in February 2010.

FDI data since 2007 demonstrates a steadily rising trend in the single-brand retail sector. Besides, there has been
less volatility in FDI flows even during periods of world-wide recession. The retail policy relaxation was followed by a
series of doubts about the sustainability of FDI in the retail sector.

Moreover, the global slowdown that adversely affected demand in most economies raised concerns regarding the
flight of capital from the Indian retail sector.

Contrary to the belief, foreign investment in the single-brand retail sector in India has been resilient to external shock.
Given its large population and rapidly expanding middle-class, there is growing demand and a market for almost
everything in the country. As a result, when most countries were facing a demand crunch, foreign brands rushed in to
invest in the Indian market, illustrated by a clear peak in FDI during mid-2008, in the accompanying figure.

From 2006 to March 2010, around 94 foreign players applied to invest through the single-brand route, of which 57
entities got approval.

The percentage increase in FDI flows in the retail sector over the last two years has been higher than that in sectors
such as the services sector, trading and telecommunications, which have a much higher share in the country's overall
FDI.

Moreover, direct investment, which is the key source of foreign capital in the retail sector, is less volatile than equity
or institutional investment. As a result, there is a lower risk of the market being affected by the adverse effects of
stock market changes and consumer confidence.
According to a 2010 A.T. Kearney report, India ranks third after China and the US on the FDI Confidence Index while
it is the top location for non-financial investment. The study found that if the Indian retail sector becomes more open
in future, it could become a vital, high potential market like China.

Foreign investors in China are lured by the increased domestic demand and high potential for retailers, contributing to
overall growth in China. In addition to this, foreign retailers in China have increased their sourcing from Chinese
SMEs, which now have a 70 per cent share in exports.

Over the past few years, the retail sector in India has been successful in attracting and retaining foreign investment.
The Indian market is emerging as an attractive destination for foreign investors interested in investing in the retail
sector.

In such a scenario, given the forthcoming opportunities, policy restrictions would not be the best way to protect
traditional retailers.

The Government should, in turn, impose regulations such as sourcing requirements, zoning regulations and back-end
investment requirements to protect traditional retailers.

This could, in fact, help in SME sourcing from India, as in the case of China. In countries such as China, the retail
sector has been a major propellant of growth and with a more liberal FDI policy, the story can be repeated in India.

Government looking at FDI in multi-brand

retail: Sharma
Tue Apr 27 2010 15:26:14 GMT+0530 (India Standard Time) by IANS ( Leave a
comment )

New Delhi, April 27 (IANS) The Indian government is consulting various stake-
holders on allowing foreign direct investment (FDI) in multi-brand retail and the
scope of such investments in other sectors, Commerce and Industry Minister Anand
Sharma said Tuesday
“FDI in multi-brand retail is part of the discussion paper being prepared by our
ministry. We are also studying the scope of FDI in sectors like agriculture, defence
and retail,” Sharma told reporters here, releasing a strategy paper on growth of
engineering exports.

A day earlier, he had said that the government was not working on the modalities of
opening up multi-brand retail to foreign investors as it was still trying to strengthen
back-end of the retail industry.

“Back-end operations have to be strengthened first as it would lead to value addition,

higher remuneration to farmers and also create jobs,” he said Monday.

The current policy allows 51 percent FDI in single-brand retail only. The government
has not allowed foreign companies to run multi-brand stores in India. The policy
allows 100 percent FDI only in cash-and-carry or wholesale trading.
 The government is expected to seek industry opinion next month to change FDI
norms in sectors like defence, agriculture, retail and pharma.

According to the minister, FDI in India since liberalisation in 1990-91 has been $175
billion. The FDI investment during April-February 2009-10 was $33 billion, he said.

More at : Government looking at FDI in multi-brand retail:

Sharma http://www.thaindian.com/newsportal/business/government-looking-at-fdi-in-
multi-brand-retail-sharma_100354646.html#ixzz0xPRuqhEN

New FDI norms: Bharti-Wal-Mart, Tata-Tesco JVs in a

spot
 Story
 Comments (2)

Topics »walmart|tesco|tata group|india|future group|carrefour|bharti

MUMBAI: New rules on foreign direct investment in wholesale trade have caused consternation among
Indian business houses with big plans for retail such as Sunil Mittal’s Bharti and the Tatas and their
partners, global giants like Wal-Mart and Tesco. The guidelines have also disrupted plans by India’s
largest retailer Kishore Biyani to team up with French company Carrefour for a foray into wholesale
trading, also known as cash & carry. 

Companies are seeking the help of lawyers and consultants to make sense of the sudden change in the
regulatory landscape which might result in existing agreements being reworked. A top lawyer ET spoke to
said the new guidelines would lead to uncertainty for investors in the retail sector. 

The new rules, issued by the industry ministry on March 31, say sales to 'group companies' should not
exceed 25% of a cash & carry company’s turnover and should only be for 'internal use'. ET had reported
the new guidelines in its edition dated April 1. The rules also require cash & carry companies to maintain
elaborate records of daily sales. 

But the main irritant is the 25% cap on sales to group companies because some agreements had been
structured so that cash & carry companies owned by foreign investors sell the bulk of their goods to
Indian-owned retailers selling to consumers. 

India allows foreigners to own 100% in companies carrying out wholesale trade but prohibits FDI in
retailers selling to consumers. Foreign-owned wholesale traders can sell to shops and restaurants or
other retailers but not to individual buyers. 

“If it is a change in policy which the government seems to claim is not, it will dislocate the existing
structures and lead to a whole lot of uncertainty. There are lots of discussions taking place on the plan of
action and the government will have to be approached again to clarify guidelines,” said Zia Mody, senior
partner of AZB, a law firm whose clients include companies in the retail business. 

A partner at Ernst & Young, which counsels retail companies, echoed the thoughts. “There is a lot of
uncertainty now because of these guidelines. And if one reads between the lines, the message from the
government actually is: ‘Do not follow the current model’. I do not know what kind of thinking went into the
guidelines. It sends a very wrong message to the investing community at a time when India is seen as a
stable economy. But I am hoping there is some scope for clarification here,” said partner Pinakin Desai. 

But a senior official in the department of industrial promotion & policy (Dipp) told ET the new guidelines
are clear and will not be changed. “There will be no exceptions. A wholesale/cash & carry business will
not be allowed to supply more than 25% to its group company. This has been done to ensure front-end
retail doesn’t come in the garb of the wholesale business,” the official said. 

Kishore Biyani, CEO of Future Group, said companies may have to tweak their plans. “We are looking
into the guidelines. This will alter a lot of plans in the retail industry.” 

A Bharti-Wal-Mart spokesperson said they were seeking clarity on the new guidelines. “It is too early to
comment on this. We are currently reviewing the new guidelines.” 

The Future Group, which owns the Big Bazaar supermarket chain, is in advanced talks with Europe’s
largest retailer Carrefour for a joint venture to set up cash & carry outlets in India. Bharti and Wal-Mart
have set up a cash & carry company in which each owns 50%. Another company, fully owned by the
Bharti Group, sells to individual consumers. 

The Dipp official declined to comment on whether this will impact Bharti’s retail plans since it has a joint
venture with Wal-Mart, stating the company is free to forward its query to Dipp. “The guidelines are self-
explanatory. There is no room for confusion. And we won’t make exceptions for anyone.” 

The guidelines also state that cash & carry outlets will have to maintain elaborate records indicating
details of sales like the buyer’s name, registration number and the amount of sale. This would have to
done every day. 

Cash and carry (sales)

From Wikipedia, the free encyclopedia

Cash and carry wholesale represents a type of operation within the wholesale sector. Its main features are
summarized best by the following definitions:

The Cash and carry concept was originally thought up and created by Lawrence Batley from Huddersfield.

 Cash and carry is a form of trade in which goods are sold from a wholesale warehouse operated
either on a self-service basis, or on the basis of samples (with the customer selecting from specimen
articles using a manual or computerized ordering system but not serving himself) or a combination of the
two. Customers (retailers, professional users, caterers, institutional buyers, etc.) settle the invoice on the
spot and in cash, and carry the goods away themselves.

 Though wholesalers buy primarily from manufacturers and sell mostly to retailers, industrial users and
other wholesalers, they also perform many value added functions. The wholesaler, an intermediary, is used
based on principles of specialisation and division of labour as well as contractual efficiency. (OECD
-Organisation for Economic Cooperation and Development).

 There are significant differences between "classical" sales at the wholesale stage and the cash and
carry wholesaler: These differences are based in particular on the fact that customers of the cash and
carry wholesaler arrange the transport of the goods themselves and pay for the goods in cash and not on
credit.[1]

In a retail context, the term has a similar meaning: customers pay cash for the goods they purchase (the
retailer does not offer credit accounts) and carry them away themselves (the retailer does not
offer delivery service).

Cash & Carry" Concept

What does the term “Cash & Carry” mean?
The term “cash & carry” derives from English and means “pay in cash and take your goods away.” 

Is it a large supermarket?
No, a supermarket is a form of retail, meaning that it sells to end-users, whereas “Cash & Carry” is a form
of wholesale, selling to intermediaries and large commercial users. Our customers buy the goods to cover
their daily business needs.

So who are your customers?

To enter the store and make a purchase, a client needs to hold a customer card, which is issued only to
professional customers on the basis of official documents they submit. Thus, our stores are open
exclusively to legal entities and private entrepreneurs.

We work with three primary groups of customers:

 HoReCa – hotels, restaurants and catering businesses who source food products and
supplementary goods from us.
 Traders – small retail outlets, neighbourhood stores, kiosks and private entrepreneurs who buy
goods for resale.
 Other business users – offices, service companies, government agencies and other organizations
that purchase anything from detergents to office equipment for professional use.
Can an ordinary person walk in a store even just to have a look?
No, cash & carry stores are open only to professional customers. Our goal is to make their shopping
experience convenient, fast and efficient. At Metro Cash & Carry, you cannot buy a single chocolate bar.
We sell our goods in bulk packaging, which is not very convenient for private users.

If you are a wholesaler, does it mean that you deliver the goods to the customer?
Unlike the traditional wholesale, our concept in based on the self-service. Our customers come to the
store, pick their merchandise and carry it away themselves. This is convenient for several reasons.
 We offer a wide assortment of goods, providing for one-stop-shopping and thus allowing our
customer to save time.
 Given the permanent availability of goods in our store, the customer can always purchase goods
he needs and is able to store and finance them in the short term.
 Despite the principle of cash payment, cash & carry largely takes over the function of financing
and stockholding on behalf of its customers.
 Because of our long business hours, a customer can do his shopping at a convenient time, seven
days a week.
 Therefore, our customers can enjoy one-stop-shopping while not giving up the benefit of
attractive wholesale prices.
Is it true that at a cash & carry, prices are lower than in supermarkets?
We at Metro Cash & Carry are able to achieve an attractive price due to a number of factors:
 Bulk quantities. Our customers buy in bulk, and so do we. Our global purchasing power allows us
to achieve significant economies of scale.
 Lean operation cost. Based on almost 40 years of experience, we have optimized our logistics
and goods management systems to minimize operation costs. The savings are then passed to our
customer.
The combination of these two factors allows us to offer to our customers the lowest possible price.
What kinds of goods can one buy at your store?
Typically, cash & carry stores carry a wide assortment in both, Food and Non Food. In Makro, we will
offer about 20 000 articles supplied by more than 600 partners. The permanent availability of our
merchandise is based on a computerised goods management system which allows us to monitor the
stock rotation on a daily basis and place orders with our suppliers in order to avoid “out-of-stock”
situations. Because of our assortment competency, customers can rely on us to provide all they need
under one roof.
RETAIL
Cash And Carry 

A flurry of new deals have put the Indian retail sector back in the news

MUTHUKUMAR K. & VISHAL KRISHNA

14 Aug 2008
 BUILDING BRIDGES: Tesco has partnered with the Tata Group to enter India (Bloomberg)

Indian retail sector is hotting up with a line of announcements. First it was the UK retail major Tesco getting into cash-
and-carry business. Close on the heels was a franchise agreement of Reliance Retail with Hamleys, the UK-based
248-year-old toy maker. Trent, run by Tata Group Chairman Ratan Tata’s half-brother Noel Tata, is doing a similar
franchisee deal with Tesco for its hyper-market business (Star Bazaar).

While the franchisee deals are effective ways to leverage the expertise and technical know-how of a retail
conglomerate, Indian retailers should understand that the cash-and-carry model adopted by foreign retailers — a
backdoor entry so to say — could give them a run for their money. While Metro and Shoprite is into it already, Wal-
Mart would soon start operations. “Cash and carry suits Indian market conditions, where the kirana stores dominate
the landscape,” says Saket Bhatnagar, principal consultant for Technopak, a Gurgaon-based retail consultant.

There are 15 million kirana stores in India, with organised retail constituting only 5-6 per cent of the $280-billion
domestic retail industry. Retail experts say it takes anything between Rs 300 crore and Rs 400 crore of sales a year
for an outlet — under cash-and-carry format — to break even. Proper sourcing and supply chain management would
be key for survival in this business.

It would be interesting to check how different retail formats co-exist. For the moment, the stringent foreign direct
investment norms are the only glue keeping the foreign and Indian retailers together.

India Retail Industry

The Indian retail industry is the fifth largest in
the world. Comprising of organized and
Retails Industry News
unorganized sectors, India retail industry is one
Aditya Birla Retails plans expansion in India
of the fastest growing industries in India, Growth Phase of Indian Retail Sector to Continue
especially over the last few years. Though Indian Garment exporters focusing on domestic retail
initially, the retail industry in India was mostly
unorganized, however with the change of tastes and preferences of the consumers, the industry is getting more
popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a
pace of 25-30% annually. The India retail industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs.
109,000 crore by the year 2010.

Growth of Indian Retail

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most
promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross
Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.
According to a report by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by 2010. By
the same time, the organized sector will be 20% of the total market share. It can be mentioned here that, the share of
organized sector in 2007 was 7.5% of the total retail market.

Major Retailers in India 

Pantaloon:

Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in
Mumbai, it has more than 5 million sq. ft retail space located across the country. It's growing at an enviable pace and
is expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched country's first hypermarket ‘Big
Bazaar’. It has the following retail segments:

 Food & Grocery: Big Bazaar, Food Bazaar

 Home Solutions: Hometown, Furniture Bazaar, Collection-i
 Consumer Electronics: e-zone
 Shoes: Shoe Factory
 Books, Music & Gifts: Depot
 Health & Beauty Care: Star, Sitara
 E-tailing: Futurebazaar.com
 Entertainment: Bowling Co.

Tata Group

Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and
Star India Bazaar. Established in 1998, it also acquired the largest book and music retailer in India ‘Landmark’ in
2005. Trent owns over 4 lakh sq. ft retail space across the country.

RPG Group

RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in 1996
with its retail Foodworld stores. Later it also opened the pharmacy and beauty care outlets ‘Health & Glow’.

Reliance

Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance
Mart are quite popular in the Indian retail market. It's expecting its sales to reach Rs. 90,000 crores by 2010.

AV Birla Group

AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van
Heusen, Peter England are quite popular. It's also investing in other segments of retail. It will invest Rs. 8000-9000
crores by 2010.

Retail formats in India

Hypermarts/supermarkets: large self-servicing outlets offering products from a variety of categories. 

 Mom-and-pop stores: they are family owned business catering to small sections; they are individually
handled retail outlets and have a personal touch.
 Departmental stores: are general retail merchandisers offering quality products and services.
 Convenience stores: are located in residential areas with slightly higher prices goods due to the
convenience offered.
 Shopping malls: the biggest form of retail in India, malls offers customers a mix of all types of products
and services including entertainment and food under a single roof.
 E-trailers: are retailers providing online buying and selling of products and services.
 Discount stores: these are factory outlets that give discount on the MRP.
 Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and other small items
can be bought via vending machine.
 Category killers: small specialty stores that offer a variety of categories. They are known as category
killers as they focus on specific categories, such as electronics and sporting goods. This is also known as
Multi Brand Outlets or MBO's.
 Specialty stores: are retail chains dealing in specific categories and provide deep assortment. Mumbai's
Crossword Book Store and RPG's Music World are a couple of examples.

Challenges facing Indian retail industry

 The tax structure in India favors small retail business

 Lack of adequate infrastructure facilities
 High cost of real estate
 Dissimilarity in consumer groups
 Restrictions in Foreign Direct Investment
 Shortage of retail study options
 Shortage of trained manpower
 Low retail management skill

The Future

The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year
2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got a
high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the
last four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to
grow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.

DI norms in retail sector should be relaxed'