A host of single-brand foreign retailers such as Italian apparel and accessories firm Gruppo Coin and French clothing retailer Celio have begun talks with their Indian JV partners to buy out or up their stakes.
This was anticipated after government decided to relax the threshold of foreign direct investment (FDI) in single-brand retail trading from 51% to 100%.
Experts said that the primary reason behind such buyouts relates to the challenges faced by these international brands in pumping more investments into the Indian market. Also, the Indian partners are agreeing to such proposals to sell their stakes in the existing JVs.
Sources close to the development said the two brands which are in discussions with their JV partners will soon approach the department of industrial policy and promotion (DIPP) with their fresh proposals to increase their stake of foreign direct investment (FDI) in their JVs in the country.
Chicco, a kidswear brand from Italian Group Artsana that works on a franchise model in India, has invested under the 100% FDI in wholesale cash and carry through automatic route. It will be presenting a case to allow its firm to make a further investment through 100% single-brand retail trading.
?Chicco is currently preparing to approach DIPP and seek clearance of its investment proposals through 100% FDI in single-brand retail trading after a year and until then will wait for statutory nods,? a source said.
?On the other hand, Celio is in talks with Future group to increase its stake from current 50% to 74% at first and then later buy out the entire stake. Similarly, Gruppo Coin will increase its stake from present 51% to 74% for which it is in talks with S Kumars. Though the source did not divulge the size of the proposed deals of the two players but it is understood that soon these foreign brands will approach DIPP with their revised proposal.
The Future Group is also expected to alter many of its existing JVs such as the one with office supply store Staples, and other brands such Celio, Daniel Hechter, Clarks.
Gruppo Coin, which is a brand of OVS industry ? the company with the highest market share in Italy in the fashion retail industry? has been ambitious of its Indian entry made in 2010.
?The decision to up the FDI limit from 51% to 100% has been seen as a welcome step considering it is expected to result in an increase in FDI in retail sector,? said Paresh Parekh, Partner – Tax, Ernst & Young.
