The government’s proposal to allow foreign direct investment (FDI) in multi-brand retail may have prompted strong opposition from many quarters, but large domestic retailers, keen to tap new sources of funds, aren’t complaining.
Several domestic retail chains had to slow down their original plans to open large format stores as the global economy plunged into recession, sharply reducing new fund avenues.
“All retailers need funds and expertise to spruce up their back-end supply chain and other related operations. These investments have a long gestation period before they can have a positive impact on a retailer's profits,” Arvind Singhal, chairman of consulting firm Technopak Advisors told Hindustan Times.
Many cash-starved retailers are seeking to ink deals with potential investors as they struggle to honour bank debt repayment commitments.
“The move (allowing FDI in multi-brand retail) could instill new life in the expansion plans and bring in international best practices of organised retail in the country,” said R.C. Agarwal, chairman and MD of Vishal Retail. The company is believed to be talking to a clutch of potential investors to infuse cash to repay bank loans.
Joint ventures with multinational retail giants will also allow Indian companies to acquire technical and managerial know-how on supply chain and back-end operations, Singhal said.