FDI curbs put brakes on growth
The Financial Express, January 13, 2010, Page 4
fe Bureau, Mumbai
Despite the retail sector accounting for 10% of the country’s GDP and around 8% of the country's workforce, equity investments seem a distant dream for the industry since government rules do not allow foreign direct investments (FDI) into the sector. Even debt financing is a Herculean task for the industry, due to unfavourable equity support prevalent in the sector, said speakers at the National Retail Summit 2010 organised by the CII on Tuesday.
Pankaj Jaju, executive director, Enam Securities, said, “The sector needs around Rs 50,000 crore equity but has seen investments of only Rs 4,000 crore.” He further said private group houses like the Reliance Group, the Birlas and the Tata Group have collectively invested Rs 2,000 crore in their separate retail ventures and the remaining Rs 2,000 crore has been raised through capital markets by fashion and lifestyle stores Shopper’s Stop Ltd and Kishore Biyani-led Pantaloon Retail etc. “If private equity is allowed in the sector, growth in retail will be even more faster,” added Jaju. The sector is considered the largest in India after agriculture, and is amongst the fastest growing industries with several players entering the market.
Explaining how procuring loans for the retail venture is difficult, Asim Dalal, managing director, The Bombay Store, said, “A year and a half ago when I approached a bank for funds to fuel our expansion plans, I was asked whether I can pledge my property as a collateral for the loan. Retaillers either have leased or a rented property. In such a scenario, one can’t offer a rented property as collateral and hence bank support is difficult.”
However, largely, whatever investments the sector has seen is either through internal accruals or by an individual.
“Previously, no banks supported the telecom sector, but today banks have a positive approach towards the sector due the enormous growth potential, said Jitendra Balakrishnan, advisor, IDBI.
The Financial Express, January 13, 2010, Page 4
fe Bureau, Mumbai
Despite the retail sector accounting for 10% of the country’s GDP and around 8% of the country's workforce, equity investments seem a distant dream for the industry since government rules do not allow foreign direct investments (FDI) into the sector. Even debt financing is a Herculean task for the industry, due to unfavourable equity support prevalent in the sector, said speakers at the National Retail Summit 2010 organised by the CII on Tuesday.
Pankaj Jaju, executive director, Enam Securities, said, “The sector needs around Rs 50,000 crore equity but has seen investments of only Rs 4,000 crore.” He further said private group houses like the Reliance Group, the Birlas and the Tata Group have collectively invested Rs 2,000 crore in their separate retail ventures and the remaining Rs 2,000 crore has been raised through capital markets by fashion and lifestyle stores Shopper’s Stop Ltd and Kishore Biyani-led Pantaloon Retail etc. “If private equity is allowed in the sector, growth in retail will be even more faster,” added Jaju. The sector is considered the largest in India after agriculture, and is amongst the fastest growing industries with several players entering the market.
Explaining how procuring loans for the retail venture is difficult, Asim Dalal, managing director, The Bombay Store, said, “A year and a half ago when I approached a bank for funds to fuel our expansion plans, I was asked whether I can pledge my property as a collateral for the loan. Retaillers either have leased or a rented property. In such a scenario, one can’t offer a rented property as collateral and hence bank support is difficult.”
However, largely, whatever investments the sector has seen is either through internal accruals or by an individual.
“Previously, no banks supported the telecom sector, but today banks have a positive approach towards the sector due the enormous growth potential, said Jitendra Balakrishnan, advisor, IDBI.
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