New Delhi: The government on Friday cleared foreign investment proposals of three single-brand retailers, including that of British footwear retailer Pavers England Ltd, to open fully owned stores.
The Foreign Investment Promotion Board (FIPB) also approved a 51% joint venture of American luxury clothing retailer Brooks Brothers and Italian jewellery maker Damiani’s plan to form a venture with Mehta’s Pvt. Ltd.
This is the first set of such clearances after the government eased single-brand retail guidelines last month, making voluntary a condition that companies should source 30% of the value of their products from small- and mid-sized domestic suppliers.
Arvind Mayaram, economic affairs secretary in the finance ministry, confirmed that the proposal by Pavers was cleared by FIPB.
India in November last year allowed 100% foreign ownership in single-brand retail, where a company sells only its own brand of goods, bumping the cap all the way up from 51%.
However, a rule that made it mandatory for foreign retailers to source 30% of the value of their products from local small firms had dissuaded them from starting operations in India. With the relaxation in the guidelines by the government last month, several companies have showed interest opening stores in India.
The speed at which the proposals have been cleared is a very positive sign for investors looking at India, said Mohit Bahl, partner, transaction services at KPMG.
“There are sufficient queries coming in from investors from across the world for single-brand retail entry both through a 100% owned route and those looking for joint ventures,” he said. It’s also “because the policy is much clearer”.
Pavers England was the first company to seek approval to set up a fully owned Indian unit in January with a Rs.100 crore investment proposal, followed by Swedish furniture firm Ikea and American fashion brand Fossil. Pavers said it already sources 30% of the value of its products from India.
In the next 24 months, Pavers plans to open 120 independent outlets and take shop-in-shop stores to 350, said Utsav Seth, chief executive officer and managing director.
The company currently has 30 franchisee stores and 74 shop-in-shop outlets. Seth plans to increase the number of points of sales to 500 by 2015, apart from upgrading the company’s research and development facilities.
Pavers had faced some hurdles as overseas single-brand retailers were originally mandated to own the brand that they planned to sell in India.
The government, however, amended this clause last month to allow the brand ownership and the investment arm to be two separate entities.
The amendment will also allow the revival of a proposal by Spanish company Inditex for its apparel brand Massimo Dutti that was earlier deferred by FIPB for not abiding by the previous ownership clause.
Pavers entered the Indian market in 2007 through Mauritius-based Pavers Foresight Smart Ventures Ltd, its $60 million equal venture with the Foresight Group, UK.
The shoe company, with around 100 stores in the UK and Ireland, had registered anew its intellectual property to comply with the revised local rules.
Brooks Brothers Group Inc. proposes to set up a 51% joint venture with Reliance Brands, a unit of Reliance Industries Ltd, allowing the company to invest Rs.6.22 crore in India.
In June, Reliance Brands had announced a joint venture with Brooks Brothers to set up shops in India with the latter owning 51% stake in the joint venture. A Reliance Brands official who confirmed the news said the company is targeting to open five stores by spring-summer of 2013.
Damiani is also set to enter the Indian market. The company could not be reached immediately for a comment.
Earlier this month, Ikea had filed the final document as part of its investment proposal in accordance with the amended policy. The company is awaiting approvals.
PTI contributed to this story.