Project Report

(Submitted for the Degree of B.Com Honors in Accounting & Finance under the University of Calcutta)

Title of the Project

FDI IN MULTI BRAND RETAIL

Submitted by
Name of the Candidate : JAY KAMDAR
Registration No. : 017-1121-0067-12
Roll No. : 1017-41-0554
Name of the College : The Bhawanipur Education Society College

Supervised by

Name of the supervisor: Mr. Divyesh Shah

Name of the college: The Bhawanipur Education Society College

Month & Year of Submission

FEBRUARY, 2015
 A Project on

“MULTI BRAND RETAIL”

NAME : JAY KAMDAR

REGN. NO. : 017-1121-0067-12

CLASS : B.COM (H) 3RD YEAR

ROLL NO. : 1017-41-0554

PHONE : 9051222038

COLLEGE : THE BHAWANIPUR EDUCATION SOCIETY COLLEGE

 ACKNOWLEDGEMENT

I would like to express my gratitude towards all the people who through their
co-operation helped make this project possible.

I wish to express my gratitude to all the concerned persons who have

extended their kind help, guidance and suggestions without which it could
not have been possible for me to complete this project report.

I would like to thanks my teacher for guiding me for this project.

Finally, my heart goes out to my parents and family who bore with me
throughout the research period and beyond. Thank you for your
unconditional support.
 TABLE OF CONTENTS

SL. NO. CONTENTS

1 LITERATURE REVIEW

2 INTRODUCTION

3 PROPOSAL FINALISED BY GOVERNMENT

4 GROWTH OVER YEARS

5 ROLE OF FDI IN MULTI BRAND RETAILING

6 NEED OF FDI IN MULTI BRAND RETAILING

7 INDIAN RETAILERS

8 EXAMPLES OF INDIAN RETAILERS

9 MERITS OF FDI IN MULTI BRAND RETAIL

10 DEMERITS OF FDI IN MULTI BRAND RETAIL

11 CONCLUSION

12 WEBGIOGRAPHY
 LITERATURE REVIEW

Allowing FDI in multi brand retailing has recently generated tremendous

euphoria for some and fear for others. It is based on the notion that it will
open floodgates for foreign retailers to invest and will change the retail
landscape forever in India. When India is the only country in the world
where the top five business houses with market caps running into trillions
are into retail business, this issue becomes much more interesting. Most
retailers in other countries do not feature even in the top 10 large firms.
Also the evidence of last 20 years of globalization by retailers shows that
there is no such case of domination of foreign retailers wherever markets
for global retailers have opened up. The Govt. of India was forced to put
on hold FDI in multi-brand retail by several political parties. The problem
arises whether opening up of FDI in multi-brand retail will create
problems or provide opportunities for local retailers. Foreign direct
investment in multi-brand retail will start a better integration of Indian
economy into the global market.

This study examines the prospects of FDI in multi-brand retail in India.

This project first speaks about the concept of FDI in multi brand retail in
India .Then it speaks of growth of retail sector in India. Then it speaks of
the role and need of FDI in multi brand retailing. Finally it speaks about
the merits and demerits of FDI in multi brand retail in India.
 INTRODUCTION
Foreign Direct Investment (FDI) broadly encompasses any long-term
investments by an entity that is not a resident of the host country. Typically,
the investment is over a long duration of time and the idea is to make an
initial investment and then subsequently keep investing to leverage the host
country’s advantages which could be in the form of access to better (and
cheaper) resources, access to a consumer market or access to talent
specific to the host country - which results in the enhancement of efficiency.
This long-term relationship benefits both the investor as well as the host
country. The investor benefits in getting higher returns for his investment
than he would have gotten for the same investment in his country and the
host country can benefit by the increased know how or technology transfer
to its workers, increased pressure on its domestic industry to compete with
the foreign entity thus making the industry improve as a whole or by having
a demonstration effect on other entities thinking about investing in the host
country. Retail Sector is one of the most important pillars of Indian economy
and it is growing at a phenomenal pace. Foreign Direct Investment (FDI) in
retail sector plays an integral role in the economic growth.

FDI in Multi-brand retail can be seen as an important reform to revive the

economy and to ease supply side pressures especially in unorganized
sectors. To revive the Indian economy, FDI policy in multi-brand retail is an
important reform that would ease supply side pressures and mitigate
inflation. Implications of FDI in multi-brand retail sector discussed outweigh
the issues related to the new FDI policy reforms. FDI in multi-brand retail
can go a long way in improving the efficiency of supply chain, infrastructure
facilities, technological advancement and other relevant areas of growth in
retail sector. The FDI policy on multi-brand retail creates opportunities for
the Micro, Small and Medium Enterprises (MSMEs) to reach out the
International markets.
 Proposal as Finalised by Government

A decision has been taken by the Government to permit FDI in all products,
in a calibrated manner, subject to the following conditions:

 FDI in Multi Brand Retail Trade (MBRT) may be permitted up to 51%,

with Government approval.
 Fresh agricultural produce, including fruits, vegetables, flowers, grains,
pulses, fresh poultry, fishery and meat products, may be unbranded.
 Minimum amount to be brought in, as FDI, by the foreign investor,
would be US $ 100 million.

At least 50% of total FDI brought in shall be invested in 'back-end

infrastructure’. Back-end infrastructure will include investment made towards
processing, manufacturing, distribution, design improvement, quality control,
packaging, logistics, storage, ware-house, agriculture market produce
infrastructure etc. Expenditure on land cost and rentals, if any, will not be
counted for purposes of backend infrastructure.

At least 30% of the procurement of manufactured/ processed products shall

be sourced from Indian 'small industries' which have a total investment in
plant & machinery not exceeding US $ 1.00 million. This valuation refers to
the value at the time of installation, without providing for depreciation.
Further, if at any point in time, this valuation is exceeded, the industry shall
not qualify as a 'small industry' for this purpose.
 Growth over 1997-2010
India in 1997 allowed foreign direct investment (FDI) in cash and carry
wholesale. Then, it required government approval. The approval
requirement was relaxed, and automatic permission was granted in 2006.
Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign
direct investment, representing a very small 1.5% of total investment flow
into India.

Single brand retailing attracted 94 proposals between 2006 and 2010, of

which 57 were approved and implemented. For a country of 1.2 billion
people, this is a very small number. Some claim one of the primary restraint
inhibiting better participation was that India required single brand retailers to
limit their ownership in Indian outlets to 51%. China in contrast allows 100%
ownership by foreign companies in both single brand and multi-brand retail
presence.

Indian retail has experienced limited growth, and its spoilage of food harvest
is amongst the highest in the world, because of very limited integrated cold-
chain and other infrastructure. India has only 5386 stand-alone cold
storages, having a total capacity of 23.6 million metric tons. However, 80
percent of this storage is used only for potatoes. The remaining
infrastructure capacity is less than 1% of the annual farm output of India,
and grossly inadequate during peak harvest seasons. This leads to about
30% losses in certain perishable agricultural output in India, on average,
every year.
 GROWTH AFTER 2011
Through 2021, is estimated to be over $250 billion a year: a revenue equal
to the 2009 revenue share from Japan for the world's 250 largest retailers.

One report estimates the 2011 Indian retail market as generating sales of
about $470 billion a year, of which a minuscule $27 billion comes from
organized retail such as supermarkets, chain stores with centralized
operations and shops in malls. The opening of retail industry to free market
competition, some claim will enable rapid growth in retail sector of Indian
economy. Others believe the growth of Indian retail industry will take time,
with organized retail possibly needing a decade to grow to a 25% share. A
25% market share, given the expected growth of Indian retail industry

The Economist forecasts that Indian retail will nearly double in economic
value, expanding by about $400 billion by 2020.The projected increase
alone is equivalent to the current retail market size of France.

In 2011, food accounted for 70% of Indian retail, but was under-represented
by organized retail. A.T. Kearney estimates India's organized retail had a
31% share in clothing and apparel, while the home supplies retail was
growing between 20% to 30% per year. These data correspond to retail
prospects prior to November announcement of the retail reform.
 Need for FDI in Multi Brand Retailing
Most Countries of the world which embarked on the road to economic
development had to depend on foreign capital to some extent. The most
important channel through which foreign Capital flows into the Country is
FDI. FDI in multi-brand retail will give a boost to the organized retail sector,
which positively impacts several stakeholders including producers, workers,
employees, consumers, the government, and hence, the overall economy in
spite of many disadvantages associated with that. China’s example indicates
clearly that FDI in retailing does not necessitate the complete closure of
local retailers. China is the world’s largest FDI recipient and it started with an
FDI investment of $ 19 billion and at present that figure has been increased
many times. Carrefour from France, Tesco from England, Metro from
Germany, and Wal-Mart from US have entered the Chinese retail sector and
has uplifted the country economy. Initially during 1992, china allowed FDI
only in a few selected cities and also restricted the ownership by 26 percent.
Later, only in 2004 did china finally permit 100 percent FDI and local
Chinese grocery stores have since grown from 1.9 million to more than 2.5
million. In India, opening up of FDI, can increase organized retail market size
to $ 260 billion by 2020

Allowing FDI in multi – brand retail trade will benefit consumers and farmers,
and will also aim at bringing down inflation. Farmers, in this case, may be
protected from the domination of intermediaries who dominate the interface
between the manufacturers or producers and consumers in most cases and
major part of the share of profit is eaten by those middlemen causing loss to
the farmers. Further, consumers will get variety of products at cheaper
prices and will have more choice to get international brands at one place.
 Role of FDI in Multi-brand Retail Trade in India
Retail Sector is one of the most important pillars of Indian economy and it is
growing at a phenomenal pace. Foreign Direct Investment (FDI) in retail
sector plays an integral role in the economic growth. FDI in Multi-brand retail
can be seen as an important reform to revive the economy and to ease
supply side pressures especially in unorganized sectors. To revive the
Indian economy, FDI policy in multi-brand retail is an important reform that
would ease supply side pressures and mitigate inflation. Implications of FDI
in multi-brand retail sector discussed outweigh the issues related to the new
FDI policy reforms. FDI in multi-brand retail can go a long way in improving
the efficiency of supply chain, infrastructure facilities, technological
advancement and other relevant areas of growth in retail sector. The FDI
policy on multi-brand retail creates opportunities for the Micro, Small and
Medium Enterprises (MSMEs) to reach out the International markets.
Farmers and consumers would benefit from the new entry of organized
retailers in multi-brand and would help tame food inflation by improving agri-
commodity management.

The published data from DIPP indicates that,

1. 40 foreign retailers have secured approval since 1992

2. $22 billion of FDI attracted 3.6% of total FDI.

3. Employment in retailing has grown at 6% p.a. since 1992 to 53 million

4. Retail sales have grown@13.5% CAGR since FDI was permitted.

5. In 2003, FDI in wholesale and retail was US$ 1.1 Billion

 INDIAN RETAILERS
A 2012 PWC report states that modern retailing has a 5% market share in India with
about $27 billion in sales, and is growing at 15 to 20% per year. There are many modern
retail format and mall companies in India. Some examples are in the following table.

Indian Retail Group Market Research

Pantaloons Retail 65 stores and 21 factory outlets in 35
cities, 2 million square feet space

Shoppers Stop 51 stores in 23 cities, 3.2 million

square feet space
Spencer’s Retail 200 stores in 45 cities, 1 million
square feet space
Reliance Retail 708 mart and supermarkets, 20
wholesale stores in 15 cities 508
fashion and lifestyle
INR1206 crore (US$200 million) per
month sales in 2013
Bharti Retail 74 Easy day stores, plans to add 10
million square feet by 2017

Birla More 575 stores nationwide

Tata Trent 59 Westside mall stores, 13
hypermarkets

Lifestyle 15 lifestyle stores, 8 home centers

Future Group 193 stores in 3 cities, one of three
largest supermarkets retailer in India
INR916 crore (US$150 million)
per month sales in 2013
 PANTALOONS
Consumer see pantaloons as an exclusive brand retailer, discount retailer,
specialty retailer and food retailer: all at once. One of the reasons for this
versatility is that the brand name has not been forced on, or even associated
with the different products and stores other than the original menswear line.
Instead, each store and product has been given its own identity and
presence. Pantaloons is essentially an organized retailer in the guise of a
large number and variety of unorganized retailers. This again represent the
company’s unique understanding and of the Indian scenario-consumers
often feel threatened in a monopolistic environment and are thus allowed to
choose between multiple brands, all of which essentially belong to the same
parent.

Pantaloons Fashion & Retail Ltd

Type Public
Traded as BSE: 535755
NSE: PFRL
Industry Retail
Founded 1997
Headquarters Mumbai, India
Number of locations 86
Area served India
Products Department Stores
Revenue Rs. 1285 Cr for FY 12 – 13
Employees 5300
 SHOPPERS STOP
Shoppers Stop is one of the leading retail stores in India. Shoppers Stop
began by operating a chain of department stores under the name “Shoppers’
Stop” in India. Shoppers Stop has 74 stores across 35 cities in India.
Specifically, Shoppers Stop stores retails clothing, accessories, handbags,
shoes, jewellery, fragrances, cosmetics, health and beauty products, home
furnishing and decor products.
Shoppers Stop launched its e-store with delivery across major cities in India
in 2008. The website retails all the products available at Shoppers Stop
stores, including apparel, cosmetics and accessories. Shoppers Stop
opened stores in Amritsar, Bhopal and Aurangabad.

Shoppers Stop Limited

TYPE PUBLIC
TRADED AS (BSE:532638)
INDUSTRY RETAIL
FOUNDED 1991
HEADQUARTERS MUMBAI,INDIA
AREA SERVED INDIA
PRODUCTS Discount department store,
hypermarket, supercenter,
superstore
REVENUE 19.30 billion(US$310
million)
FY 11-12
EMPLOYEES 14000+
 SPENCERS RETAIL

Spencer's boasts of a wide range of private brand products that

encompasses both foods as well as non-foods FMCG category. 'Spencer's
smart choice' is the leading in store brand which has a plethora of products
ranging from juices, noodles, cookies, honey, Air freshner etc. Spencer's
also has the 'clean home' range of home improvement products and 'Tasty
wonders' range of snacks and impulse food range. Apart from this ,
Spencer’s has very successfully launched its general merchandize products
under the brand name of MAROON which includes Non-Stick, Hard
Anodized, Home Plastic and Foils.

Spencer's Retail Limited

TYPE Subsidiary

Industry RETAIL

Founded 1996

Headquarters KOLKATA,WEST BENGAL,INDIA

Number of locations 400 Across 60 Cities 

Employees 60,000+

PARENT RPG Group

Website spencersretail.com

LIFESTYLE RETAIL
Now completing its 15 years, Lifestyle has 41 stores across the country.
Lifestyle Stores retails a range of branded apparel and private labels under
the following categories of apparel, footwear, accessories & handbags, and
home products. Lifestyle International Pvt. Ltd today offers a truly
international shopping experience, a fact borne by numerous accolades

Lifestyle International Ltd

Type Private company

Industry Retail Fashion Clothing

Founded 1999

Headquarters Bangalore, Karnataka

Area served India

Products Fashion apparel

Accessories for men & women

Parent Landmark Group

Website Lifestyle Store

 TRENT (WESTSIDE)
Trent is the retail arm of the Tata group. Started in 1998, Trent
operates Westside, one of the many growing retail chains India based
in Mumbai, Maharashtra and Landmark, a bookstore chain with Brick and
mortar stores in various locations of India. The company has a turnover of
Rs. 357.6 crores (FY 2005-2006) and currently operates more than 60
stores in the major metros and mini metros of India.

 The company has retail stores in 42 major Indian cities under the
Westside brand.
 Trent also operates the hypermarket Star Bazaar in 8 Indian cities.

Trent (Westside)

Type Subsidiary

Industry Retail

Founded 1998

Headquarters Mumbai, Maharashtra, India
Parent Tata Group

Website Official Website

Merits of FDI in Multi brand retail

1. The biggest companies operating in this sector are Walmart, Tesco,
and Carrefour. These companies deal directly with farmers and buy fruits,
grains and vegetable grown by farmers. This will eliminate the middle men
operating between farmers and consumers, thus benefitting both. Farmers
will get much higher price for their yield and customers will get goods at
cheaper price.

2. At present, approximately 35% of food grains are wasted due to lack

of storage facilities. Since these companies have ample amount of financial
resources, they will open their own warehouses for the purpose of storing
goods and thus reducing the wastage drastically.

3. Approximately, 5-7% of total fruits and vegetables are wasted daily

during transportation. With the advent of these companies, there will be
huge investment in infrastructure and transportation facilities, thereby
reducing transportation wastage.

4. These stores will provide employment to large number of educated

youth which will improve the economic condition of our society.
5. There will be large amount of tax collection by government from these
firms and employees working in these firms.

6. With the coming of these firms, these will be huge investment in

infrastructure in rural areas. These firms will bring new technologies with
them and train farmers to use them and provide them requisite technical
know- how. This will improve the working condition of farmers and improve
the yield of crops.

7. There will huge dip in inflation. As the cost price of consumable good
will decrease, inflation will reduce to a considerable level.

Demerits of FDI in multi-brand retail

1. FDI in retailing can upset the import balance, as large
international retailers may prefer to source majority of their products globally
rather than investing in local products.

2. The opening up of the retail sector would affect the sales in the
unorganized sector. As a result, the employment it provides would be
affected. In addition, by reducing the number of intermediaries, organized
retailing will lead to some job displacement.

3. Global retailers might resort to predatory pricing. Due to their

financial power, they often sell below cost in the new markets. Once the
domestic players are wiped out of the market, foreign players enjoy a
monopoly position, which allows them to increase prices and earn profits.

4. It is said that FDI would provide employment opportunities.

However, the fact is that they cannot provide employment opportunities to
semi-illiterate people. Though they can provide employment opportunities like
drivers, security guard etc. but this argument gets more attention because in
India semi-illiterate people in quiet large in number.

5. Indian retailers have yet to consolidate their position. The existing

retailing scenario is characterized by the presence of a large number of
fragmented family owned businesses, who would not be able to survive the
competition from global players.

6. The organizational form of rural producers as they interact with

Big Retail is still not being done. Small farmers can undertake contract
farming, but they have no bargaining power and will be at the mercy of their
buyers. Small producers need to be organized into farmer companies or
producer cooperatives that can deal with Big Retail from a much stronger
position. So that their interests are not lost.

CONCLUSION
For the developing country like India, foreign direct investment in multi-brand
retail sector should be consciously considered by the Govt. of India. In
broader way, India's local retail business will definitely get a chance for up
gradation of the import of improved technological and transportation
management knowledge from the multinational retail players. Foreign direct
investment in multi-brand retail will start a better integration of Indian
economy into the global markets and, as such, it is important for the Govt. of
India to develop retail sector for the total economic development of country
and welfare of society in the country. People wish row over FDI in retail gets
over soon and India should embrace new era of retailing and Government
makes right kind of body to vigil these giants.

OUTCOME
While making this project I came to know about different scenarios of FDI in
multi brand retailing. I learnt how FDI came in Indian retail sector. I came
across about the different merits and demerits of if FDI is allowed in the
retail sector of India. I gained knowledge about different facts and figures of
FDI. I came to know about various Indian companies who are engaged in
multi brand retail and how do they work in this market place. I came across
the history of these various companies. When did they start and about the
scale of the same companies in the current scenario.

WEBLIOGRAPHY

REFFERENCES:
http://indianresearchjournals.com/pdf/IJMFSMR/2013/January/14.pdf
http://pbr.co.in/Vol-5%20Iss-5/3.pdf
http://www.cait.in/e-book/FDI%20in%20Multi-brand%20Retail%20in%20India.pdf
www.academia.edu
www.wikepedia.com
http://indianresearchjournals.com/pdf/APJMMR/2013/July/12.pdf
http://www.pib.nic.in/newsite/erelease.aspx?relid=87768
Annexure- IA
Supervisor's Certificate

This is to certify that Mr. Jay Kamdar a student of B.Com. Honors in

Accounting & Finance Taxation in Business of “The Bhawanipur Education
Society College” under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project
Report with the title “FDI IN MULTI BRAND RETAIL” which he is
submitting, is his genuine and original work to the best of my knowledge.

Place: Kolkata Signature:

Date: Name: Divyesh shah

Designation:

Name of the college: The

Bhawanipur Education Society
College
Annexure – IB

Student’s Declaration

I hereby declare the project work with the title “FDI IN MULTI BRAND
RETAIL” submitted by me for the partial fulfillment of the degree of B.Com.
Honors in Accounting & Finance under the University of Calcutta is my
original work and has not been submitted earlier to any other University/
Institution for the fulfillment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been
incorporated in this report from any earlier work done by others or by me.
However, extract of any literature which has been used for this report has
been duly acknowledged providing details of such literature in the
references.

Signature :
Place : KOLKATA Name :JAY KAMDAR
Date : Address: 6/4 BALRAM BOSE 1ST
LANE, Kolkata-700020
Registration-No.017-1121-0067-12
Roll No. : 1017-41-0554