Though foreign direct investment in the multi-brand retail sector has received the approval of both houses of Parliament, it may take a while for it to finally take off, say industry executives and experts.
Global retailers will make only "token investments" until more clarity
emerges on the details of the regime facing protests and state-level roadblocks.
"FDI will bring in capital and technology and is not much of a threat," said a spokesperson with an international retailer on the condition of anonymity. "Initially you will see a few token announcements and acquisitions but most international retailers will wait for the next elections to make a final decision."
Indian retailers, feeling the crunch in terms of technology and investment, have welcomed the policy that allows 51% FDI in multi-brand retail firms. Global retailers, however, are likely to be still be shy with economies of scale likely to be hit due to the absence of a state-wise consensus on the subject.
Wal-Mart for instance has set up wholesale retailing operations. But to open front-end stores on a large scale across the country, the company may require partnerships with local retailers. The likes of Wal-Mart are expected to wait before making any major investments.
"FDI will bring investment in infrastructure and best practices to India but all of this will take time," said Mohit Kampani, chief executive officer, Spencer's Retail, a subsidiary of Sanjiv Goenka-led firm CESC. "Investors need a stable environment and clarity that the executive decision will not be revoked in the next elections. Also, individual states' stand and their approvals are yet to come."
"Most Indian retailers have huge debt and are keen to tap investments," said Amnish Agarwal, independent retail analyst. "The likes of Big Bazaar, HyperCity and Spencer's will look to offload some stake over the next three years but it will depend on how keen global retailers are and the clarity that they get."
"The main concern for international retailers is that some states might allow FDI in multi- brand retail while others may not," he added.
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