No need for change in riders; see FDI deals soon: Pantaloon

The government allowed 51% foreign investment in multi-brand retail last week, but left it to the states to permit global retailers open stores.

It tweaked sourcing norms for FDI above 50% in single brand retail, requiring foreign firms, which want a relaxation of the 30% procurement norms, to set up manufacturing facilities in the country.

Rakesh Biyani, joint managing director of Pantaloon Retail doesn’t see a need for changing the riders associated with FDI. "These riders have been designed to ensure the fact that investment happens in a larger scale. The need is to reduce the supply chain cost, reduce the wastages in the supply chain and improve the quality," he said in an interview to CNBC-TV18.

Meanwhile, he is hopeful that in the span of another six-12 months, we could see the government approving FDI deals.

The stock of the retail giant today touched an intraday high of Rs 209. At 09:22 hrs the share was quoting at Rs 189.30, up Rs 31.70, or 20.11%.

Below is the edited transcript of Biyani’s interview with CNBC-TV18.

Q: Are there any nuances in the conditionality that you have heard so far in the announcement that you have liked to be tweaked?

A: Not really, we have studied these riders in the past and they have been designed to ensure the fact that investment happens in a larger scale. The investment happens in the back end, plus the limit of USD 100 billion and 50% to go in the back end.

The need is to reduce the supply chain cost, reduce the wastages in the supply chain and improve the quality. That requires investment in the back end and in the supply chain. It is fair; it would have been good if more states could come on board, but my gut feel is as things will improve, some states will implement it, other states will follow soon thereafter.

Q: What did you make of the specific change in the sourcing norm for SMEs? Did that allay your concerns or does that continue to be contentious issue?

A: No I don’t think so because for the mix of products that we sell, it’s definitely possible to achieve these norms. It’s only going to help these small and medium enterprises (SMEs). Even today such sourcing is happening. With a focused approach I am sure that small and medium enterprises will flourish.

Q: What is your assessment of how many states FDI multi-brand can get rolling with, politically we have got some idea but what is your sense of what can be implemented on the ground?

A: I think the million people population restriction could be waived out by the states. Also it covers distances beyond 10 km also. So maybe about 16, maybe 30, it’s a beginning and that is what is important. We are making a beginning; we are going to make a beginning in terms of ensuring the fact that we can have investment in supply chain and add more value added products coming through.

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Q: Given that states have discretion on whether they will allow multi-brand or not, do you think it might lead to any kind of complications on implementations?

A:  It is s bit difficult to predict that today. We are a federal structure; this country has always operated in that manner. There are rules and regulations are different in different states. Most companies have been able to perform with these rules and regulations.

There may be new rules and regulations once they are framed, I am sure we will be able to come around to ensure the fact that we run a business which is compliant with the law in each state.

Q: Is it all going to be sentiment or the big question is whether you are going to expect some real deals being struck in the retail space any time soon? Do you think there will be deals soon?

A: I would assume that we could see some action very soon. In some cases, considering the investment, some people may also want to wait for greater clarity. But I would assume the fact that six-12 months would be a good window for seeing action for approvals from the government.

Q: Do you expect most of the large deals to be struck by the large Asian retail players or do you expect it to come from the Western retail as Walmort’s and Carrefour’s of the world?

A: Majority of the world's largest retailers come out of Europe or the US, but retailers out of Japan and Korea, have been visiting India. Those are countries which have significant knowledge, their understanding of product, technology side.

They would be keen to come into country like India to set up a base. India is an attractive market and it is a market for the long-term. I am sure all developed nations and retailers would look at India as a place to investment in.

Q: What are your channel checks telling you about the political noise or opposition this time around? There was an unfortunate rollback last time around. Does it look like that is a low probability item this time around from what you are hearing?

A: I don’t know what the political parties will take a stance, but there is a lot of merit in supporting FDI in retail. It is only a matter of time that we will all take efforts to explain that to people who are opposing it. All facts and data available from many other parts of the world also reflect the fact that FDI in retail is significantly beneficial to consumers as well as to farmers.

That is the merit which exists in India; we need the farm sector to reach the next level, and without investment that’s not going to happen. It’s only a process, maybe it will take more time but I am sure everybody will align and respect the need for having FDI in multi-brand retail.