Retail stocks surge after nod for 100% FDI in single-brand retail via automatic route

Shares of five retail firms rose by 2.98% to 5.53% at 13:57 IST on BSE after the cabinet approved 100% foreign direct investment under automatic route for single brand retail trading.

The announcement was made during market hours today, 10 January 2018.

Meanwhile, the S&P BSE Sensex was down 55.54 points or 0.16% at 34,387.65.

Future Enterprises (up 5.53%), Shoppers Stop (up 3.41%), Trent (up 3.07%), Provogue India (up 4.93%), and V2 Retail (up 2.98%) gained.

The Union Cabinet chaired by the Prime Minister Narendra Modi, has given its approval to a number of amendments in the foreign direct investment (FDI) policy. These are intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country. In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment.

Government has put in place an investor friendly policy on FDI, under which FDI up to 100%, is permitted on the automatic route in most sectors/activities.

Government approval is no longer required for FDI in single brand retail trading (SBRT). Extant FDI policy on SBRT allowed 49% FDI under automatic route, and FDI beyond 49% and up to 100% through Government approval route. It has now been decided to permit 100% FDI under automatic route for SBRT.

It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1st April of the year of the opening of first store against the mandatory sourcing requirement of 30% of purchases from India.

For this purpose, incremental sourcing will mean the increase in terms of value of such global sourcing from India for that single brand (in Rupee terms) in a particular financial year over the preceding financial year, by the non-resident entities undertaking single brand retail trading entity, either directly or through their group companies. After completion of this 5 year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India's operation, on an annual basis.

A non-resident entity or entities, whether owner of the brand or otherwise, is permitted to undertake 'single brand' product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking single brand retail trading and the brand owner.

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