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New e-comm rules may help boost topline for offline retailers by Rs 10,000-12,000 cr: CRISIL

Press Trust of India  |  New Delhi 

Tighter norms for could help boost revenues of brick and mortar (B&M) by 150-200 basis points (bps) or Rs 10,000-12,000 crore in the 2020 fiscal, according to ratings agency

"Revenue growth of B&M retailers could increase 150-200 bps in fiscal 2020, as re-engineer business models to conform to the revised and more stringent regulations, which would slow down their revenue growth," said in a statement.

In December, the government introduced new regulations that would bar with foreign investments from selling products of the companies where they hold stakes, and ban exclusive marketing arrangements.

These norms, which are effective February 1, would hit and Walmart-backed the hardest. These two are also the largest in the country.

"Nearly 35-40 per cent of industry sales, amounting to Rs 35,000-40,000 crore, could be impacted due to the tightened policy," Ratings said.

Sethi added that the impact on would be largely in the and apparel segments, which account for a bulk of their revenues.

CRISIL, in its statement, estimated that if B&M retailers lap up even a fourth of the impacted sales of e-retailers, it would lead to topline gains of Rs 10,000-12,000 crore.

"That, in turn, would mean revenue growth would be 150-200 bps higher at about 19 per cent, compared with CRISIL's earlier expectation of 17 per cent for fiscal 2020," it added.

CRISIL noted that following the restriction on equity ownership in sellers, will need to make changes in their supply chain. They may alter business model in several ways, including adoption of franchisee model, thereby leading to increase in the cost of compliance as they strive to adhere to revised guidelines in less than 40 days.

Between fiscals 2014 and 2018, in grew at 40 per cent a year to reach Rs 1 lakh crore, way faster than B&M's growth at 13 per cent to Rs 3.2 lakh crore during the same period, it added.

"The strong growth in was driven by deeper market penetration and attractive pricing compared with B&M retailers. Robust FDI inflows of over Rs 95,000 crore in the past four fiscals have made this possible," said.

However, long-term growth potential for Indian e-retail continues to remain strong driven by increasing internet penetration, growing household private final consumption expenditure (PFCE) and convenience offered by online shopping, CRISIL said.

In the near term, B&M retailers would see improving revenues, profitability and better cash flows, thus benefitting their overall credit profiles, it added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 14 2019. 17:50 IST