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India, soon a shoppers' paradise

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December 26, 2005 12:57 IST

If the mushrooming of hypermarkets and shopping malls in your neighbourhood in 2005 zapped you, fasten your seat belts. You ain't seen nothing yet. The coming year will finally see the big boys of Indian business entering the arena. There is also a good chance that global retail giants like Wal-Mart and Tesco may join the fray.

After debating with its Left allies for long, the Manmohan Singh government seems to have made up its mind to allow foreign direct investment in retail trading. Union Commerce Minister Kamal Nath went to the extent of telling reporters recently that a favourable decision would be taken in the first quarter of 2006 itself.

Tesco to up India sourcing to $165 mn

When that happens, it will open the sluice gates for foreign investment in the sector. After China, India is the final frontier for the likes of Wal-Mart and JC Penney. Organised retail is only 3.5 per cent of the total Indian market, which is estimated at Rs 1,000,000 crore (Rs 10,000 billion). There is a huge opportunity that every retail chain worth its cash registers is waiting to tap. A recent PricewaterhouseCoopers report identified India as the most attractive destination for retail FDI.

The large untapped market has also caught the fancy of many an Indian business house. They might be a little late in spotting the trend, but there is no doubting the seriousness of their intent. Most of them will roll out their retail plans in 2006.

Fresh hope for Wal-Mart

Mukesh Ambani is known to be putting together a war chest of over Rs 20,000 crore (Rs 200 billion) to enter the retail business. For starters, Reliance Industries has started experimenting with stores in its petrol stations across the country.

ITC has started setting up rural hypermarkets to tap the other India. Telecom czar Sunil Mittal, who has set up a farm processing business, is also waiting to get a foreign partner when the policy changes. Godrej and Bombay Dyeing are converting their large land banks into malls. The Bhartias of Jubilant Organosys too are rolling out their stores in the South.

Who's afraid of Wal-Mart?

What is more, the financial markets are preparing to be a part of the action. Some retail chains are going public to bankroll their plans. The Piramal family-controlled Piraymd came out with an IPO recently. Subhiksha, supported financially by Venture Capital Partnership Fund and ICICI Ventures, too is looking at raising funds from the public. Private equity funds like ICICI Ventures are looking at increasing their exposure to retail.

FDI in retail: New policy mooted

Look at some of the projections. According to a KSA-Technopak report, the total retail space in the country is expected to nearly triple from 26.4 million square feet in 2005 to 88 million square feet in end 2007. The number of shopping malls are projected to more than double from 158 currently to over 358 by 2007. And the good news is that the shopping revolution will spread to B category cities, which will account for over 15 per cent of the new space being built up.

Kishore Biyani, the managing director of Pantaloon Retail, has lost count of the new stores he opens every month. What he does remember is that he wants to increase his store space nearly four-fold over the next three years to a staggering 10 million square feet and that his brands will soon have a presence in over 50 cities across the country. "We have to grow as fast as possible," says he.

Shoppers, rejoice!
Surajeet Das Gupta