The first shot has been fired in the age of FDI in single-brand retail. On December 23, Finland?s Amer Sports, which owns several leading global sporting brands, sent a letter to Pantaloon Retail, terminating an April 2010 agreement that had made the Kishore Biyani-owned company the exclusive distributor of Wilson and W brands in India. Pantaloon struck back, suing the Finnish company in the Delhi High Court and securing an injunction. The case is scheduled for hearing in February.
A person with direct knowledge of the matter said Amer snapped the agreement as it wanted to open its own branded stores in India, since the country now allows full foreign ownership of single-brand retail ventures. The company owns prominent brands including Wilson, W, Atomic and Solomon.
Amer?s termination letter said Pantaloon must stop selling Wilson and W branded goods in six months. Pantaloon?s lawyers told the court that the company is currently maintaining stocks worth R17 crore of Wilson and W brands and it would not be possible to sell that inventory in six months. Pantaloon?s lawyers prayed that either Amer should buy the entire stock or give the Indian company reasonable time to sell the inventory.
Future Group chairman Kishore Biyani could not be contacted despite several calls on his mobile phone.
Pantaloon unit Planet Sports sells apparel, sports goods and accessories from several brands including Converse, Speedo, Prince, Callaway, Spalding, Puma, Nike and Adidas. Pantaloon Retail, the country?s largest listed retailer, is part of the Future Group that operates hypermarkets and various speciality chains in India.
As part of welcoming foreign investment to the country?s vast retail sector, the Union cabinet on November 24 allowed 51% foreign ownership of multi-brand retail operations and 100% in single-brand. However, following protests from opposition parties and its own coalition allies, the government shelved the policy change on multi-brand FDI while allowing single-brand FDI to go through.
Full ownership of single-brand retail was notified on January 10. Analysts said the move could see more overseas single-brand firms operating in India through JVs opting for 100% subsidiaries now.
However, 100% foreign ownership of single-brand retail ventures comes with several riders: The business should source at least 30% from domestic small scale industries, an attempt to boost small and medium enterprises in the country. Swedish furniture manufacturer Ikea, which was keen on entering India, said last week that it has put its plans on hold. Its chief executive Mikael Ohlsson was quoted as saying that the sourcing rule is an obstacle to investment.
Meanwhile, American cruiser bike-maker Harley-Davidson is planning to open fully-owned stores to sell Harley-Davidson apparel, head gear and jackets in India.