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No franchising in multi-brand retail: India
June 7, 2013, 8:20 am

People shopping in a Bharti-Walmart store in India (AP Images)

People shopping at a Bharti-Walmart store in India (AP Images)

Foreign retailers entering India’s multi-brand segment will not be allowed to franchise their stores, and will have to put 50 per cent of their investments in back-end infrastructure specifically for the chain they are setting up.

In a clarification issued on queries from global retailers, including Wal-mart, Tesco and Carrefour, on FDI policy for multi-brand retail trading (MBRT), the Department of Industrial Policy and Promotion (DIPP) said the “front-end stores set up by MBRT entity will have to be company-owned and company operated only.’’

The DIPP also said the mandatory 30 per cent sourcing from small industries will be counted only for sales through the front-end stores.

Bloomberg has quoted estimates by Technopak Advisors that India’s retail market will grow to $725 billion by 2017.

On the contentious issue of investment in the back-end, the DIPP said investments in multiple infrastructure companies would not be counted towards fulfilment of condition of mandatorily investing 50 per cent in the back-end infrastructure.

“Fifty per cent of the investments brought in, must be invested in back-end infrastructure, and any amount spent in acquiring front-end retail stores would not be counted towards back-end infrastructure,” the DIPP said.

Source: Agencies