Foreign retailers may get to dilute stake in Indian JVs to PE firms

23 Dec 2008

The government is considering a proposal that would allow single-brand foreign retailers such as Diesel, Louis Vuitton and Marks & Spencer to dilute stakes in their Indian ventures in favour of foreign Private Equity (PE) firms, reports ET. The government also holds the view that in the wake of the global credit squeeze, such a proposal would give a fillip to retail ventures through infusion of PE funds. The government has cleared over 100 single brand retail JVs since January 2006, when the sector was thrown open for foreign investment, the report adds. However, such deals would be within the current overall foreign direct investment (FDI) cap of 51 per cent. As of now, foreign PE funds are not allowed to invest in the Indian retail ventures of global brands. Under the current norms, only foreign brand owners can invest in such ventures. These JVs have to sell all products in their outlets under a single global brand. Meanwhile, a proposal to hike the FDI limit in single brand retail to 100 per cent is currently pending with the Union cabinet. The current proposal is aimed at offering some relief to the retailers till 100 per cent FDI is allowed in the sector.