After US & Europe chains, Asian retail group eyes India

Once foreign direct investment (FDI) is allowed into the multi-brand retail sector, international retail chains Walmart, Carrefour and Tesco may face competition from an Asian player—Malaysia’s Parksons.

A Parksons spokesperson told Business Standard the group wanted to set up department stores across Bangalore, Chennai and Delhi. The chain, which sells products ranging from groceries and cosmetics to fashion apparel, plans to invest in India by 2013. So far, only retail chains from the US and Europe have expressed interest in investing in India.

Today, Parksons, with a sales turnover of $3.25 billion, announced its foray into the Sri Lankan market, adding India was next on its agenda. Without specifying whether it would operate in the multi-brand or the single-brand category, a company spokesperson said, “The retail model will be keeping in sync with the nation’s stipulations.”

The Singapore-headquartered company refused to specify its likely investment or a proposed joint venture in India, saying as of now, it had only acquired stake in a Sri Lankan chain and it “will build a base before entering India in 2013”. Parksons is investing in Sri Lanka’s retail garment company Odel.

A statement today by Parksons Retail Asia Managing Director Alfred Cheng read, “Sri Lanka has always been an attractive proposition as an emerging market, with its rising per capita income and growing middle class.” He added, “This could set the stage for us to work together for expansion into the neighbouring countries of Bangladesh, Pakistan and India over time.”

Parksons group, a subsidiary of East Crest International, operates 102 department stores across 60 cities in four countries. China has 47 Parksons stores, Malaysia has 37 and Vietnam and Indonesia have eight each. While the first store in Malaysia was opened in 1987, the group entered China in 1994.

In a presentation, the chain said Cambodia would be its next retail destination. Aiming to become Asia-Pacific’s leading department store chain, it has set ambitious merger and acquisition targets. The group says it plans to open 16 to 18 stores a year across the globe.

India does not permit any foreign investment in multi-brand retail. Currently, negotiations are underway with various state governments to change this policy. In November 2011, the Union Cabinet had decided to permit 51 per cent FDI in multi-brand retail, but kept the move in abeyance after political opposition. In single-brand retail, however, 100 per cent FDI is allowed, albeit with stiff sourcing conditions.