The Foreign Investment Promotion Board (FIPB) on Monday approved two major investment proposals: the UK-based Tesco’s plan to enter the Indian multi-brand retail segment with an initial outlay of $110 million (Rs 680 crore) and Vodafone Plc’s bid to raise its stake to 100 per cent in the Indian venture paying over Rs 10,000 crore.
British retailer Tesco’s proposal to set up a joint venture with Tata group company Trent Hypermarket is probably the fastest ever to be processed and cleared by the FIPB. The proposal was filed with the Department of Industrial Policy and Promotions on December 17, after which it was processed and sent for inter-ministerial consultations. It came before the FIPB last week and brought up for consideration by a committee chaired by Economic Affairs Secretary Arvind Mayaram.
Tesco will invest $55 million (around Rs 340 crore) in three years to develop back-end infrastructure. Tesco and Trent will have 50 per cent equity each in the joint venture. The Government opened multi-brand retail to foreign investment in September 2012, but with an equity cap of 51 per cent.
Since the Centre’s FDI policy on retail is an enabling one, the proposed venture will have to take approval from State governments and local authorities before opening stores. Foreign retailers can set up shop in 12 States and Union Territories. The joint venture is expected to open its shop first in Maharashtra and Karnataka, and operate under Star Bazaar, Star Daily, Star Market or Star Extra brand names.
At its meeting on Monday, the FIPB cleared the way for the Cabinet Committee on Economic Affairs (CCEA) to consider a proposal allowing Vodafone to raise its stake to 100 per cent with an investment of over Rs 10,000 crore. Any foreign investment proposal of or over Rs 1,200 crore needs CCEA approval after FIPB clearance.
Vodafone now holds 64.38 per cent equity stake in the Indian venture, while the remaining is with Piramal Enterprises and Analjit Singh. Piramal will get Rs 1,241 crore for selling 10.97 per cent share, while Analjit Singh will pocket Rs 8,900 crore for parting with 24.65 per cent holding. The shares will be bought by CGP India Investment associated with Vodafone Plc.