FIPB gives nod to Tesco FDI, Voda stake buy

Tags: News

UK firm becomes first to bring FDI into multibrand retailing

The UK-based Tesco will be the first global multi-brand retail company to bring foreign direct investment into the country with the foreign investment promotion board (FIPB) on Monday clearing its proposal to pick up a 50 per cent stake in Tata’s Trent Hypermarket with an initial investment of $110 million.

The FIPB, chaired by economic affairs secretary Arvind Mayaram, also approved British telecom major Vodafone’s $1.6 billion (about Rs 10,141 crore) proposal to buy out the minority stakes to become the first telecom firm to own 100 per cent stake in its India venture.

The FIPB approval to the Tesco proposal came in line with commerce and industry minister Anand Sharma’s promise that the first FDI in multi-brand retail would be cleared before the end of this year.

The company is mandated to bring in additional $55 million – that is 50 per cent of the initial investment in backend operations. The government allowed 51 per cent FDI in multi-brand retail in September last year after a delay of one year following opposition from some of the ruling UPA allies and opposition parties.

India’s $500 billion retail sector is expected to grow rapidly in the coming years and one estimate suggested that an 8 per cent annual GDP growth would double the size of the retail sector to $1 trillion in five years.

Trent Hypermarket already runs 16 outlets in western and southern India with the help of Tesco. It plans to sell 14 categories of products, including tea, coffee, vegetables, fruits, meat, fish, dairy products, wine, liquor, textiles, footwear, furniture, electronics and jewellery.

The FIPB nod to the Vodafone proposal will require a final nod from the cabinet, as the foreign investment is beyond Rs 1,200 crore, a finance ministry official said. The government liberalised norms in August this year to allow 100 per cent FDI in telecom from 74 per cent earlier.

Vodafone owns 64.38 per cent in Vodafone India. It plans to acquire the 10.97 per cent minority stake held by Ajay Piramal and the 24.65 per cent held by Vodafone India’s non-executive chairman Analjit Singh. While Piramal Enterprises’ 10.97 per cent stake is valued at Rs 8,900 crore, the 24.65 per cent stake held by Analjit Singh through Scorpio Beverages is worth only Rs 1,241 crore.

The FIPB, however, deferred a decision on HDFC Bank hiking FDI in the bank. HDFC sought FIPB to raise the foreign investment holding limit beyond the existing 49 per cent. The foreign shareholding in the bank now stands at 52.18 per cent.

The foreign investment application of SingTel Global (India) to increase foreign equity participation of existing foreign investor to 100 per cent from 74 per cent also came up before FIPB. The proposal entails investment of Rs 2.98 crore. A decision on this will be announced later, the official said making it clear that the proposal has not been deferred.

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