Hailing government’s decision to approve Tesco’s proposal to pick up stake in Trent ’s hypermarket subsidiary, Govind Srikhande, MD, Shoppers Stop says the clearance will allow many more players to tie-up with the existing retail operator as against the desire to set up only Greenfield projects earlier.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: This decision and the fact that a foreign retail investment can go directly into the frontend store means that valuations of all the organised retail stores setup by Indian-own chains will go up, is that the first logical outcome?
A: I don’t want to comment on valuations but if you are allowing Brownfield projects, there are more options for players to tie-up with local Indian players.
Till date no one was allowed to take up a stake in an existing company. They wanted only Greenfield projects to be setup. This particular clearance clearly shows that you can now have a tie-up with an existing retail operator and that means that many more players can actually come in and also tie-in with local players.
Q: Give us a sense of the international climate in terms of the appetite for investment in India? Tesco had publicly virtually said that there was immense pressure from the Indian government to invest in India and we have seen Wal-Mart walk away from what was considered and called by Wal-Mart a major emerging market in India. Given all that, is this a reasonable expectation that foreign retailers will look at the Indian market more keenly?
A: Yes definitely. If you look around the world globally retail markets aren’t really growing. In India retail markets continue to grow even now. Secondly, the depth of Indian market is still very large. Currently at USD 500 billion, in the next 5 years it will double or may quadruple in about 12 years or 14 years of time. So, the market has a long way to go.
There is ample opportunity for a player to come in and get a decent market share in the growing market conditions. It is a welcome sign for any international player to look at this opportunity and to reconsider their entry plan for India.
Q: We know that Tesco is going to invest in stores in Maharashtra and Karnataka but there are several states that have declared their opposition to allowing multi-brand foreign investors including Delhi's latest government. Given that, is political risk and lack of some other kinds of regulatory clarity still an issue for investors?
A: We always held on to one opinion about India that entering India is like entering Europe. If you are entering one state at a time you would be able to get a right foothold in India. You can't make a pan-India plan of entering all the 29 states.
As of date there are about 11 states that are willing to allow multi-brand retail to enter. Even if you start with three or four of them and launch your programme that is fine enough. Political risk is always there but over a period of time consensus about multi-brand retails benefit should be built in.
It would require some amount of convincing by both the sides that what is the right way to take ahead multi-brand retail. The light of the day would be right reasoning.
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