Indian retailers jumped on Friday after the government moved to open up the supermarket sector to global giants, a decision seen prompting a flurry of investments and tie-up opportunities for local players.
The government on Thursday approved 51 per cent foreign direct investment in multi-brand retail, paving the entry of international firms such as Wal-Mart, Tesco and Carrefour into the $450 billion market.
"FDI in multi-brand retail would benefit capital-constrained retailers such as Pantaloon Retail," Wall Street bank JPMorgan said in a research note on Friday.
"Accelerating the pace of investment in the supply chain to meet demands of increasing scale and enhancing efficiencies... besides expertise of foreign retailers."
Shares in Pantaloon Retail (India) jumped as much as 18.2 percent, Shopper's Stop rallied 11.4 percent, andTrent, part of the salt-to-steel Tata Group conglomerate, rose 17.2 percent.
In comparison, the main stock index was down 0.7 per ent at 9:35 a.m. (0405 GMT).
The government said late on Thursday that would also raise the cap on foreign investment in single-brand retailing to 100 per cent from 51 per cent.
The cabinet decision, confirmed to ET by several ministers who attended a late evening meeting and set to be formally announced by the government in Parliament on Friday, provided the spark for a series of realignments in the country's fledgling organised retail sector. For instance, the world's biggest retailer Walmart indicated that it would extend its 'back-end' partnership with the Bharti Group into front-end retailing soon, possibly by picking up a stake in Bharti Retail.
The government's decision is fraught with great political risk during what is perhaps the weakest phase in its nearly eight years of governing India. The proposal was opposed by two constituents of the ruling coalition - Trinamool Congress and the DMK, a senior cabinet minister said.
The government's decision to press ahead in the face of opposition won it plaudits from industry, especially at a time it has been pilloried for indecision and policy paralysis.
The government on Thursday approved 51 per cent foreign direct investment in multi-brand retail, paving the entry of international firms such as Wal-Mart, Tesco and Carrefour into the $450 billion market.
"FDI in multi-brand retail would benefit capital-constrained retailers such as Pantaloon Retail," Wall Street bank JPMorgan said in a research note on Friday.
"Accelerating the pace of investment in the supply chain to meet demands of increasing scale and enhancing efficiencies... besides expertise of foreign retailers."
Shares in Pantaloon Retail (India) jumped as much as 18.2 percent, Shopper's Stop rallied 11.4 percent, andTrent, part of the salt-to-steel Tata Group conglomerate, rose 17.2 percent.
In comparison, the main stock index was down 0.7 per ent at 9:35 a.m. (0405 GMT).
The government said late on Thursday that would also raise the cap on foreign investment in single-brand retailing to 100 per cent from 51 per cent.
The cabinet decision, confirmed to ET by several ministers who attended a late evening meeting and set to be formally announced by the government in Parliament on Friday, provided the spark for a series of realignments in the country's fledgling organised retail sector. For instance, the world's biggest retailer Walmart indicated that it would extend its 'back-end' partnership with the Bharti Group into front-end retailing soon, possibly by picking up a stake in Bharti Retail.
The government's decision is fraught with great political risk during what is perhaps the weakest phase in its nearly eight years of governing India. The proposal was opposed by two constituents of the ruling coalition - Trinamool Congress and the DMK, a senior cabinet minister said.
The government's decision to press ahead in the face of opposition won it plaudits from industry, especially at a time it has been pilloried for indecision and policy paralysis.
Shoppers Stop hits 52-week high; Pantaloon Retail up
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NEW DELHI: Shares of Shoppers Stop Ltd hit 52-week high in early trade on Monday after a government panel on Friday recommended opening up India's multi-brand retail sector to foreign direct investment.
Shopper's Stop Ltd hit a 52-week high of Rs 504 in early trade today. At 11:10 AM, shares in the counter were trading 3 per cent higher at Rs 480.00.
"It's a path breaking move in multi-brand retail", says BS Nagesh VC Shopper's Stop in an interview with ET now. "The positive move in multi-brand retail will open up strategic tie-ups, FII investments in the capital-intensive industry and will help in opening up capital inflows", adds Nagesh.
Raising capital to improve liquidity crunch will become easier for existing players. "FDI policy have to also encourage opening of many stores and once it becomes more clear and rider's taken out then one would be in a position how the policy will help in improving back-end, supply chain and multiplication of front end stores", adds Nagesh.
The government has moved a formal proposal to allowFDI of upto 51% in multi-brand retail stores. FDI in multi-brand retail business is currently prohibited in India.
The player which might look at this opportunity will be large conglomerate groups whether its large Hypermarket chains who have a turnover in the range of $10-60 billion and most of American and European brands eyeing this opportunity because it will involve initial investment of $100 million.
"Increase in competition will help in improving quality and better price to the consumers", adds Nagesh.
"Suggestion of 51% FDI is a positive move for retail industry", says Thomas Vargese, CII National Committee-Retail & CEO, Aditya Birla Retail in an interview with ET Now. "However riders to proposed FDI may discourage small retailers", adds Thomas.
After the announcement of FDI share in retail most global retailers are on a 'wait & watch' mode right now. "Global players however find it difficult to succeed in India", adds Thomas.
Stock Reaction
Shares in Pantaloon Retail rose nearly 8 percent hitting a day's high of Rs 351.35 and a low of Rs 340.20. At 11:09 AM, shares in Pantaloon Retail were trading nearly 3 per cent higher at Rs 342.60.
Shares in CESC Ltd were trading 5.3% higher at Rs 349. The stock has hit a day's high of Rs 356.95 and a day's low of Rs 333.25.
Shares in Provogue India Ltd were trading 2.1 per cent higher at Rs 31.65, while shares in Trent Ltd were trading 2.1 per cent lower at Rs 1207.
Shopper's Stop Ltd hit a 52-week high of Rs 504 in early trade today. At 11:10 AM, shares in the counter were trading 3 per cent higher at Rs 480.00.
"It's a path breaking move in multi-brand retail", says BS Nagesh VC Shopper's Stop in an interview with ET now. "The positive move in multi-brand retail will open up strategic tie-ups, FII investments in the capital-intensive industry and will help in opening up capital inflows", adds Nagesh.
Raising capital to improve liquidity crunch will become easier for existing players. "FDI policy have to also encourage opening of many stores and once it becomes more clear and rider's taken out then one would be in a position how the policy will help in improving back-end, supply chain and multiplication of front end stores", adds Nagesh.
The government has moved a formal proposal to allowFDI of upto 51% in multi-brand retail stores. FDI in multi-brand retail business is currently prohibited in India.
The player which might look at this opportunity will be large conglomerate groups whether its large Hypermarket chains who have a turnover in the range of $10-60 billion and most of American and European brands eyeing this opportunity because it will involve initial investment of $100 million.
"Increase in competition will help in improving quality and better price to the consumers", adds Nagesh.
"Suggestion of 51% FDI is a positive move for retail industry", says Thomas Vargese, CII National Committee-Retail & CEO, Aditya Birla Retail in an interview with ET Now. "However riders to proposed FDI may discourage small retailers", adds Thomas.
After the announcement of FDI share in retail most global retailers are on a 'wait & watch' mode right now. "Global players however find it difficult to succeed in India", adds Thomas.
Stock Reaction
Shares in Pantaloon Retail rose nearly 8 percent hitting a day's high of Rs 351.35 and a low of Rs 340.20. At 11:09 AM, shares in Pantaloon Retail were trading nearly 3 per cent higher at Rs 342.60.
Shares in CESC Ltd were trading 5.3% higher at Rs 349. The stock has hit a day's high of Rs 356.95 and a day's low of Rs 333.25.
Shares in Provogue India Ltd were trading 2.1 per cent higher at Rs 31.65, while shares in Trent Ltd were trading 2.1 per cent lower at Rs 1207.
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