Swedish MNC in talks with govt for an initial investment of around Rs.700 crore
With the government allowing 100% FDI in single-brand retail trading, Hennes & Mauritz AB (H&M), the world’s second-largest apparel retailer, is planning to enter India. Having already had?a few rounds of consultations with the Indian government, H&M is likely to propose an initial investment of around R700 crore in the country.
Sources familiar with the matter said H&M would submit its application to the department of industrial policy and promotion (DIPP) in a day or two through law firm Titus &Co.
The H&M proposal will be the second from a Swedish multinational after global furniture giant Ikea, which wants to set up shop in the country..
H&M has clarified that it will comply with the investment rules laid down for single-brand retailing, including the mandatory 30% local sourcing, preferably from small and medium enterprises. Since H&M does not own any factories and, instead, buys clothes and other products from around 800 independent suppliers, primarily in Asia and Europe, complying to the sourcing norm would not be tough for the retailer.
The Indian apparel industry?is already a major source?for the firm for its global supplies.
The company sourcing from India is of about $200 million annually and once it sets up its Indian subsidiary, the sourcing is likely to get increased.
As per the FDI norms, H&M will be using its single brand name “H&M” to sell its entire product range under single-brand retail stores. H&M, in its application, will seek to sell apparel for women, men, teenagers and children, own-brand cosmetics, accessories, footwear and a textile interiors concept ? which it calls “H&M Home” in other countries.
H&M also comprises six different independent brands, H&M, & Other Stories, Cheap Monday, COS, Monki and Weekday, but, for India, it is understood that the brand might later start selling all these ranges under a single brand name, “H&M”.
?We will start with a few stores and we will see if everything (goes) as we hope, then we will expand heavily from there,? H&M chief executive Karl-Johan Persson had said during his recent visit to India. There are around 2,800 H&M stores in more than 40 countries and 1,04,000 employees.
H&M’s India foray is in line with its growth target to increase the number of stores by 10?15% per year. According to H&M’s website. ?The growth is entirely self-financed. Emphasis is always on quality, sustainability and continued high profitability.?
According to experts, H&M’s India debut will make other players confident of setting up shops here. ?An increasing number of international brands across formats shall foray into India to leverage the potential. Keen competition is driving the international brands to adopt the ?made for India? models, leading to higher acceptance and, thus, increased share from around 18% in 2011 to 25% over the next five years,? said Arvind Singhal, retail expert and CMD, Technopak Advisors.
?H&M is a fantastic brand and India is one of the markets which they should consider definitely. The brand which already has a presence across the globe and being unique in nature India will surely add to its growth story,? Singhal said.
According to Technopak, the market size of the apparel industry in India in 2005 was $25 billion and is expected to grow to almost $55 billion by 2015. In India, the textile and apparel market size was estimated to be R2,73,000 crore ($58 billion) in 2011 and is projected to grow at 9% CAGR to R6,64,000 crore ($141 billion) by 2021.
The employment in the Indian textile and apparel sector stands at 45 million and with an additional employment of 60 million in allied sector, total employment figure stands at 105 million, said a recent analysis by Technopak.