Top 8 Cities To Get $15 B Investment In Retail

Despite the international slowdown in consumer confidence levels, the retail business in Indian cities is set to continue on its growth trajectory, according to an industry survey.

A recent survey conducted by retail consultant Technopak suggests that the country's top eight cities, including Ahmedabad, will attract an investment of $15 billion over the next five years.

This figure is set to grow further, if investments in malls and other ancillary industries are taken into account.

"The retail sector in India is pegged to attract at least $30 billion over the next five years. Half of this will be diverted to the top eight cities," associate vice-president of Tecknopak Research, Purnendu Kumar, said. "This will include both foreign direct investments (FDI) and investments from domestic majors such as Reliance, Aditya Birla Group and the Future Group," he added.

The survey slots Mumbai, Chennai, Delhi, Hyderabad, Bangalore, Pune, Ahmedabad and Kolkata among the select eight. "Of these, Mumbai, Chennai and Delhi will receive the lion's share, accounting for about 30%, or $9 billion, of the total investments," Kumar said.

According to Technopak, these eight cities currently account for more than 90% of the organised retail market in India. The country's total organised retail market India is estimated at around $15 billion, and is expected to grow at the compounded rate of 30% annually, assuming that the total retail growth remains less than 10%.

The consultancy firm says growth in the sector can further be accelerated if the government opens its doors to the multi-brands market. "In India, foreign players can only enter the cash and carry market, which is not enough to attract foreign investments into the country," Kumar said.

While the top cities will continue to lead the market over the next few years, tier II cities and other growth centres are expected to join the fray, accounting for about 40% of investments. Rural areas are seen receiving nearly $3billion in investments by 2012.

According to international consultant Jones Lang LaSalle Meghraj (JLLM), the country's retail sector is expected to grow by 35% by 2010, driven by a strong economy, favourable demographics, rising wealth levels, changing lifestyles and rising consumer aspirations. The growth is also expected to spill over to smaller cities.

"There is still a dearth of retailers in tier II and tier III cities. It costs less to establish an enterprise in these cities, and retail players can cash in on the high aspiration for brands from the metros, as well," Shubhranshu Pani, JLLM's managing director for retail, said.

Review Tata, Virgin Deal, GSM Players Urge Dot

New Delhi: GSM operators have urged the Department of Telecom to reinvestigate the deal between Tata Teleservices and Virgin Mobile for a possible violation of the Foreign Direct Investment (FDI) norms.

In a communication to DoT, the Cellular Operators Association of India said that rules regarding Mobile Virtual Network Operators should be made clear and no operator should be allowed to take a back-door entry into the telecom sector. The DoT had earlier given a clean chit to the Tata-Virgin deal.

However, COAI wants the issue to be examined once again. “The arrangement between Virgin Mobile India and Tata Teleservices has implications from the perspective of the foreign direct investment policy of the Government of India. The FDI Policy limits foreign investment in the telecom services sector and completely bars it in the retail sector. It is important, therefore, to examine whether the mobile services being provided by Virgin Mobile India meet the restrictions imposed by the FDI Policy,” said the COAI letter.

COAI has also urged DoT to clarify the rules for providing MVNO and franchising. “Virgin Mobile India claims to be a franchisee of Tata Teleservices offering in India the “Virgin Mobile” brand of services of Tata Teleservices. It is well known that the brand “Virgin Mobile” belongs to the Virgin Group of companies based in UK. It is equally well known that the mobile services that have been launched in India by Virgin Mobile India are the same services that the Virgin Group already offers, as an MVNO, in other parts of the world under the same brand. It is counter-intuitive that a group with a well-known brand of mobile services would first transfer its brand and expertise to Tata Teleservices and then take the same brand and expertise back for use in India under a franchising arrangement, unless this double loop is deployed to overcome a regulation,” COAI said.

FDI In Metlife Likely To Cross 26%

Mumbai: GS Strategic Investments, a subsidiary of Goldman Sachs, is purchasing a 39.36 per cent stake in M Pallonji Enterprises Ltd (MPEL), which owns a 10 per cent stake in Metlife India Insurance Company. Metlife India is 74 per cent owned by Indian companies and 26 per cent by US-based Metlife. One of the promoters of Metlife India, the M Pallonji group, has accorded to divest a 39.36 per cent stake in its subsidiary MPEL to the Goldman Sachs unit, which indirectly gains a 3.9 per cent interest in Metlife India Insurance Company. Though FDI in insurance companies is capped at 26 per cent, the Insurance Regulatory and Development Authority (IRDA) does not take into account stakes held by foreign entities in the Indian promoter of an insurance company as long as the stakes are not held by the foreign partner in the insurance company itself. The decision to sell a stake by the M Pallonji group to Goldman Sachs was taken to augment capital flow to Metlife India Insurance Company. The promoters about a month ago invested Rs 350 crore of capital in Metlife India to take its total paid up capital to Rs 1,230 crore.