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"It is a welcome step. However, we need to get into finer details. We have to understand if there are any riders and what will be the repercussions of the same".
Kumar Rajagopalan, CEO
Retailers Association of India
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In July 2011, the Union Government's Committee of Secretaries (CoS) gave in-principle approval to the proposal to allow up to 51 per cent FDI in multibrand retail. The proposal will now go to the CCEA for final clearance. Currently, FDI is allowed in single-brand retail only. There was a long standing demand from Indian as well as foreign retail companies for allowing FDI into multi-brand retail. The CoS has set the following terms for the clearance of such proposals:
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Foreign retailer making the investment can commission a separate entity to invest in back-end support by outsourcing the task.
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Investing at least 50 per cent of the FDI in back-end infrastructure should be mandatory.
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30 per cent sales turnover will have to come from small traders.
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The retailers will have to source at least 30 per cent manufactured items - in value terms - from small and medium enterprises.
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The move will allow overseas retail giants like Wal-Mart, Tesco and Carrefour to open stores in the country through majorityowned JVs.
The month of July saw two long pending FDI proposals being cleared by CCEA. The Committee cleared the Reliance Industries (RIL)-BP Plc deal clearing the decks for the country's biggest FDI worth $7.2 billion (approx Rs 32,000 crore). According to the terms agreed upon, BP will pay $7.2 billion for a 30 per cent stake in RIL's 23 oil and gas blocks, including the D6 one in the Krishna-Godavari basin. "We welcome the Indian government's approval for our alliance with Reliance Industries, partnering with India in its quest for energy security. This transaction is part of BP's strategy of creating long-term value through alliances with strong national partners, taking material positions in significant hydrocarbon basins, and increasing our exposure to growing energy markets. We will now work to complete the commercial agreements for the deal in the next few weeks," said Bob Dudley, Chief Executive, BP Group.
The CCEA also gave final approval to Cairn Energy's proposal to sell majority stake in Cairn India to Vedanta Resources. However, the nod is subject to Cairn or its successor agreeing to treat royalty payments on Rajasthan oilfields as recoverable from oil sales. Also, Cairn India will have to withdraw the arbitration it has initiated disputing its liability to pay Rs 2,500 per tonne oil cess on its 70 per cent share in the fields. Besides, the approval will be subject to ONGC, which has a stake in all the three oil and gas producing properties and five out of seven exploration assets of Cairn India, waiving its preemption rights, which CCEA termed as the partner's NOC. During the month, the FIPB ratified 31 FDI proposals worth Rs 3,844.7 crore. Of this, the largest proposal was of Multiples Pvt Equity Fund -Scheme-1 to bring in foreign funds worth Rs 1,000 crore. Cox & King's Rs 450 crore proposal has been given a green signal to carry out the business of leisure travel services, corporate travel services, visa processing services and foreign exchange services. Mumbai-based Ashwell Holding Company's proposal to get FDI worth Rs 852.6 crore, by selling equity to foreign entity, was also accorded clearance. Hinduja Energy (India) has been accorded approval for induction of foreign equity of Rs 400 crore into an Indian company. The ministry also approved proposal of Cayman Islands, based NCBG Holdings to invest Rs 4.45 crore in the defence sector.
Besides, the FIPB deferred decision on 18 proposals, including Vodafone Essar for transfer of share and Walt Disney Company India to undertake the additional activity of broadcasting.
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Top 10 FIPB Proposals Cleared during July 2011
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Applicant |
Activity
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FDI (Rs crore)
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Multiples Pvt. Equity Fund – Scheme-1, Mumba
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To issue units, to make investments in securities of the Indian companies and to distribute income realized on its investment. |
1,000.00
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Ashwell Holding Company Pvt. Ltd., Mumbai
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Induction of foreign equity to carry out the business of investing company. |
852.60
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Cox & Kings Ltd., Mumbai
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To allot warrants together with secured redeemable non-convertible debentures (“NCDs”) and/or equity shares and/or convertible securities other than warrants (“Convertibles”), through a Qualified Institution Placement (QIP) to the non-resident Qualified I |
750.00
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Hinduja Energy (India) Ltd., Mumbai
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Induction of foreign equity into an Indian company which does not have any operations and also does not have any downstream investments. |
400.00
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Natixis Global Asset Management, France
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To invest by way of indirect foreign investment in Pension Fund Subsidiary. |
300.00
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BNP Paribas S.A. Paris
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To set up a WoS to act as an investing company. |
225.00
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Big Showbiz Broadcast Ltd., Delhi
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Induction of foreign equity and conversion of operating company into an operating cum investing company to invest, from time to time, in other companies engaged in, or proposing to engage in, up-linking and downlinking of non-news and non-current affairs |
79.14
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Brahma Center Development Pvt. Ltd., Delhi
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To issue equity shares against the initial bid amount paid to HSIIDC to carry out the business of Builders, developers & infrastructural contractors. |
62.00
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Status Infin (India) Pvt. Ltd., Hyderabad
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Induction of foreign equity in an investing company providing finances to companies engaged in power, infrastructure and emerging sectors in India. |
45.00
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Ybrant Digital Ltd.
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Ex post facto approval for issue of warrants to carry out the business of Software Development, IT and IT enabled services. |
45.00
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Total |
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3,758.74
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table source: www.finmin.nic.in
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