New Delhi, October 5, 2011.- RS & Co Law Offices, a Delhi based law firm, held a meet of international investors on FDI in India in retail sector on October 5, 2011 at New Delhi. At the meet, Rai S. Mittal, Partner, RS & Co Law Offices and other professionals of the firm deliberated on government’s proposal to open fully single-brand retail sector to FDI in a bid to speed up the reform process. Mr. Mittal, while answering queries from the attendees, stated that several international retailers may rush in to acquire a 100 per cent stake in their existing/proposed Indian ventures, if the government fully opens up the single-brand retail sector to foreign direct investment, even though retailing in India has a lot of complexities in terms of local laws, property issues and so on. Mr. Mittal, while briefly explaining the numerous laws applicable to retail sector and the lower-level bureaucracy that may be involved in running retail operations, emphasized the need of adequate legal and professional support for successful retail operations, in view of the nature and extent of business and multiple locations.

“Everyone would love to have the full control, but in India, on a proper balance, some may prefer to have local partners, at least for two to four years, given the complexities in opening and running stores, unless they have the experience of partnership not working well,” said Ms. Priya of RS & Co Law Offices. In high profile single brand industry, franchise model often may not always work due to apparent discomfort of the global retailer and as the franchisee may like to deal in other brands also causing possible conflict. In addition, local partner in a JV set up may generally have more say in the business in view of his own in-house skill in setting up and running retail shops in Indian market which is uniquely placed.

At the same time, Mr. Rai S. Mittal was critical of the proposal being seen as a bid to speed up reform process. He said that the need for FDI in multi-brand retail is indeed more crucial as it will have substantial impact on inflation, supply chain, infrastructure, etc., which cannot be achieved by single-brand retail. Allowing 100 percent FDI in single brand retail will only get more global brands to enter India and help the existing ones to expand faster but the move cannot be used as a substitute to relaxing multi-brand retail to FDI. The present proposal, he said, was meant to benefit luxury segment of lifestyle goods and apparel. It would immensely benefit international single brand retailers as there has always been a mismatch between brand's vision for expansion in India and execution by or with a local partner. More funds would be available for expansion as presently the level of investment by global players is linked with the arrangement they have with a local partner. The proposal, he said, has little to do with the on-going debate on FDI in retail and its impact on small retailers.

At present, India does not allow FDI in multi-brand retail. In the wholesale business, 100 percent FDI is allowed, whereas in single brand retail 51 percent overseas investment is permitted.

RS & Co Law Offices may be contacted at rsco@rslegal.co.in.