India is gearing up for some serious shopping. After global furniture giant Ikea, another Swedish multinational retail-clothing firm, Hennes & Mauritz AB (H&M), wants to set up shop in the country under the relaxed FDI policy in single-brand retail.
H&M is expected to line up an initial investment of $500 million for its India foray, which the company calls an “interesting” market.
H&M is the second-largest global clothing retailer behind Inditex, the Spainsh retailer and the parent firm of clothing brand ZARA. It has footprint in 43 countries and does not want to miss the opportunity to open stores in India, sources said.
As of 2011, H&M employed around 94,000 people. The company had 2,325 stores at end of 2011 and 2,629 stores at end of August 2012. In FY11, the company reported a revenue of around $ 19.8 billion.
?What we can say is that India is one of many interesting markets for H&M,? H&M press officer H?can Andersson told FE.
The company is currently in talks with various legal firms in the country to help it prepare a formal application that will be then presented to the department of industrial policy and promotion (DIPP).
“They want to wait for a formal Cabinet clearance to Ikea’s proposal to understand the dynamics of the recently-cleared foreign direct investment policy in single-brand retail trading,” said a senior executive in a legal firm.
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 chairman & managing director, 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.
The company’s production is outsourced to approximately 800 factories in Europe and Asia, thus meeting the sourcing clause will also not be a hurdle.
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.
Textile and apparel trade was estimated to be $662 billion in 2011 and is expected to grow at a CAGR of 5% in the next 10 years. Experts said that apart from the EU and US, China, Japan and India are the biggest markets for apparel and the production is primarily concentrated in China, India, Bangladesh, Vietnam and Turkey.
In India alone, 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.
