Foreign brands worried, but keep hopes high

Foreign brands are cautious about investing in India at a time when the political agitation against foreign direct investment in the retail sector is gaining strength. However, they still have hopes on this market, partly due to better alternatives. This was clear at a two-day retail summit, one of the biggest in Asia, that started here on Friday.

Several international companies, mainly in the food and restaurant segment, decided to stay away even after confirming their participation. Industry representatives blamed this on the policy uncertainty in India triggered by the agitation against the Cabinet decision on allowing 51 per cent FDI in multi-brand retail and raising the limit to 100 per cent for the single-brand segment.

A prominent South African food chain and an Italian single-brand retailer were among those who backed out of the summit and, perhaps, franchise agreements in the country. The top management of Dubai-based Binhendi also gave the retail meet a miss.

“The half-structured approval is only giving rise to confusion. Foreign players will make a move once they see full confidence on the FDI matter,” said Gaurav Marya, president, Franchise India, organiser of the conference.

“The foreign investors’ appetite in the India market will be low and they are not likely to take a big call on FDI at this point.” Investors will put in serious capital only when the environment is more certain, he added. Tony Fitzpatrick, managing partner, Franchise Your Business, an international consultancy, stressed that foreign investors were cautious.

“The agitation against FDI in retail is making foreign players nervous,” Fitzpatrick said, adding that Americans were certainly getting worried. The British don’t get nervous that easily, he said.

Tony White, regional general manager, Gloria Jean’s Coffees, told Business Standard, “Investors are cautious but are not fearing the situation.” He added that given the recessionary environment in Europe and the US, companies cannot ignore markets like India, due to the high consumption rate.

Allessandro Fichera, senior partner, Octagona (an Indo-Italian consultancy in the retail space), agreed. Despite the agitation and uncertainty in the India market, there’s hardly any option left to an international investor, he said.

“Markets are getting crazy in the US and Europe. One has to invest in the BRIC countries. And, India is the most interesting market in the region,” said Fichera.

Another executive associated with the retail meet said a very negative signal was going out to the world, which would surely make foreign companies rethink their strategies on India.