The Department of Industrial Policy and Promotion (DIPP) has received eight proposals from global brands including Skechers, Kiko International, Ryohin Keikaku, Nike, Adidas and Swarovski for investing in the single-brand retail sector following the relaxation in foreign direct investment rules in July.
Official sources told The Indian Express that the spurt in number of applications for single-brand retail segment is a result of the DIPP allowing foreign investors to conduct business through more than one joint venture in India. On July 7, the DIPP clarified that a foreign entity will be permitted to undertake single-brand product retail trading in the country for the specific brand through one or more wholly-owned subsidiaries or joint ventures.
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Following the clarification, Italian cosmetic brand Kiko International, established by the Percassi Group in 1997, has approached the DIPP for beauty and skin care products including cosmetic products, apparel, jewellery, handbags and cloths.
US-based Skechers, a $2-billion company, has sought approval for undertaking single-brand retail trading of its products in the country. Similarly, Pantaloons Fashion and Retail has applied regarding retail sale of clothing footwear and leather articles while Austria-based Swarovski has filed a revised application for “100 per cent FDI in single-brand retail trading”.
Earlier, Swarovski, which sells accessories, jewellery and home decor items through more than 2,350 retail outlets worldwide, could not get approval on the basis of its first application which sought both cash-and-carry and single-brand retail format. However, due to the lack of clarity in the rule, the DIPP had asked it to apply separately for both formats failing which the 30 per cent sourcing norm would apply for the cash-and-carry format too.
In fact, owing to confusion, several single-brand retail applications were stuck. Many foreign investors had also sought opening up franchisees in the country along with their own stores.
According to the extant policy, retailers are allowed to run 100 per cent subsidiaries in India while they can now also operate a mix of fully-owned stores and franchisees or engage in wholesale trading. While 49 per cent is on automatic route, beyond that the Foreign Investment Promotion Board (FIPB) approval has to be taken. The mandatory 30 per cent domestic sourcing norm kicks in when the FDI level goes above 51 per cent.
Japan’s Ryohin Keikaku Co Ltd, which operates household goods chain under the brand name Muji, has also filed an application for entering into the segment, proposing to “manufacture and sell various garments, furniture, household goods, cosmetics, stationery and other Muji brands” according to the application. Muji brand of the company has over 700 stores across Japan, Asia, Europe, the US and Australia.
Nike has also approached the DIPP for a second time, proposing to open fully-owned stores while Adidas has also filed an application seeking to invest up to 100 per cent FDI for its branded products and variants.