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Capitalising On Grey Areas

In the past couple of years, Amazon has made three investments in Indian retail companies through indirect routes
twitter-logo Ajita Shashidhar   New Delhi     Print Edition: September 22, 2019
Capitalising On Grey Areas

The Government of India has been against allowing FDI in multi-brand retail for a long time since it believes it would hurt the interests of local retailers. However, it has allowed for a number of grey areas in the policy which global retailers have capitalised upon. In the past couple of years, Amazon has made three investments in Indian retail companies through indirect routes. It has recently invested in Future Retail by buying a 49 per cent stake in Future Coupons, a promoter entity of Future Retail, and has a call option to acquire the entire stake of Future Retail over a period of time. Earlier, it invested in Aditya Birla Retail's More by joining hands with Samara Capital. Amazon also picked up a 5 per cent stake in Shoppers Stop through its investment arm.

The ambiguity in the retail policy existed in FDI in single-brand retail too. Though the recent FDI announcement has eased the 30 per cent local sourcing clause for single-brand foreign retailers, and the local sourcing compulsion did dissuade many single-brand retailers from investing in India, the fact remains that many foreign retailers found an easy way to enter India by partnering with Indian retail companies. The likes of Zara and Marks and Spencer have entered India through such partnerships. The 1.3 billion consumption opportunity in India is an attraction for all global retailers and Indian retailers need capital to survive. It is high time policy makers come up with friendlier investment policies.

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