press trust of india
New Delhi, Jan 10: Tech giant Apple and Chinese handset makers such as Xiaomi and Oppo could turn out to be big beneficiaries of government allowing 100 per cent FDI in single brand retail under automatic route, analysts say.
Setting up own stores helps brands offer closer engagement with customers, something that will come handy for these global giants seeking to woo customers in the hypercompetitive Indian handset industry.
According to Counterpoint Research Associate Director Tarun Pathak, Chinese players as well as companies such as Apple have engaged with customers through multi-brand outlets.
“With their own stores, they can manage the end-to-end experience for the customers,” he said.
While the move itself is a positive for handset makers like Apple, pricing of devices will play a crucial role in the success of the brand in the Indian market, Pathak said.
Apple, which plays in the premium category, has its own stores across major cities in the world, including in markets such as the US, Australia, China, Singapore and Hong Kong.
Anshul Gupta, Research Director at Gartner India, said that the latest decision “removes systemic friction and will allow global brands to speed up investment to begin operations sooner”.
“Easing of norms will definitely excite global brands to enter into India to tap the vast consumer market,” he added.
An industry watcher said many Chinese companies have set up their own stores in China as well that drive strong sales for these brands.
He added that Chinese companies such as Xiaomi and Huawei would hope for a similar outcome in India as well.
Till date, 49 per cent FDI was allowed under automatic route, while beyond that government approval was required.
“It has now been decided to permit 100 per cent FDI under automatic route for SBRT (single brand retail trading),” the government said in a statement.
As part of changes in FDI norms in the SBRT, the government has also relaxed mandatory local sourcing requirement of 30 per cent, which has been a long standing demand from foreign brands.
Under the relaxed norms, a foreign retailer will be able to get credit from incremental increase in sourcing for its global operations from India towards the mandatory 30 per cent local sourcing requirement for its business in the country.
Retail stocks gain
New Delhi: Retail stocks Wednesday rose by as much as 6 per cent following the government’s decision to relax FDI norms in single-brand retail.
Shares of Indian Terrain Fashions surged 6.66 per cent, Future Enterprises climbed 5.11 per cent, Provogue (India) rose by 4.93 per cent, Monte Carlo Fashions gained 3.99 per cent and V-Mart Retail went up by 3.68 per cent on BSE. Among others, Future Consumer rose by 2.25 per cent, Shoppers Stop (2.01 per cent) and Trent (1.15 per cent).
