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India abandoned a rule againstforeign single-brand retailers operating stores without a localpartner, paving the way for global companies including StarbucksCorp. (SBUX) and Ikea.
The government ratified a Nov. 24 cabinet decision to raisethe ownership limit to 100 percent from 51 percent for single-brand, Trade Minister Anand Sharma said in a statementyesterday. The new rules take effect immediately and require thecompanies to use smaller Indian companies for at least 30percent of procurement, he said.
Wal-Mart Stores Inc. (WMT), Carrefour SA (CA) and other foreign chainsare still excluded from India��s $400 billion retail market afteran attempt last year to change the law failed. Prime MinisterManmohan Singh��s administration has struggled to advance itsinitiatives amid opposition from its own allies and a corruptionscandal that paralyzed parliament.
��This is a welcome move with a clear potential to lift thegeneral mood in the economy,�� Rajan Bharti Mittal, managingdirector at Bharti Enterprises, Wal-Mart��s Indian partner forwholesale hypermarkets, said in an e-mailed statement. ��We hopethe initiative is a precursor to further liberalization in thesector in the days to come.��
Panta! loon Ret ail India Ltd. (PF), India��s largest retailer,gained in Mumbai trading after the announcement. The stock roseas much as 10 percent, the most since Nov. 25, while ShoppersStop Ltd. (SHOP) surged 20 percent. Trent Ltd. (TRENT), which has a franchiseagreement with Tesco Plc (TSCO), rose as much as 6.9 percent. India��sbenchmark Sensitive Index rose 0.4 percent.
Waiting for Multi-Brand
��People think that this would lead to a positive stance onmulti-brand retail soon,�� Sameer Narang, an Mumbai-basedanalyst with HDFC Securities Ltd. said in a telephone interview.��My opinion is that it��s not coming any time soon, given theway things went the last time the government tried to introduceit, I doubt a lot of traction will be seen on it.��
Starbucks would compete in India with operators includingLavazza SpA (LAVA)��s Barista Coffee Co. and closely held Cafe CoffeeDay. The Seattle-based coffee chain said in November it intendedto open its first store in India this year.
��Ikea welcomes the decision from the Indian government toallow 100 percent FDI in single-brand retail,�� NivedeetaMoirangthem, the furniture and housewares retailer��s Indiaspokeswoman said in an e-mailed statement. India is a veryinteresting potential retail market for the Ikea Group.����
Calls and e-mails to the Starbucks public-relations team inSeattle weren��t immediately answered. Starbucks signed anagreement with India��s Tata Coffee Ltd. (TCO) in January 2011 tosource beans and consider opening stores.
Suspended Opening
Singh��s allies and other parties opposed a decisionallowing retailers selling more than one brand, unveiled in lateNovember, saying it would hurt local mom-and-pop type stores.The government suspended the policy Dec. 7.
��India remains committed to a system of regulation that issupportive of enterprise and we will do everything to encourageforeign investment,�� Singh, 79, said in a Dec. 14 interview,
He said he would renew the multi-brand retail initiative! after re gional elections this year.
Singh, whose championing of free-market policies twodecades ago helped India become the second-fastest growing majoreconomy, faces allegations that the government lost $31 billionby unfairly awarding mobile-phone service permits in 2008 toineligible companies and over contracts for hosting the 2010Commonwealth Games.
The benchmark BSE Sensitive Index (SENSEX) dropped 25 percent lastyear, while the rupee slumped 16 percent versus the dollar.
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