The Foreign Investment Promotion Board (FIPB), the agency dealing with foreign direct investment in the country, has imposed a 50 per cent export obligation condition on Supreme Tradelinks (STPL), a company whose 100 per cent equity is being acquired by Marks and Spencer Reliance (MSRPL). MSRPL is a joint venture between UK apparel and retail giant Marks and Spencer and Mukesh Ambani-led Reliance Industries.
The condition is being imposed as the company is engaged in the manufacturing of items which are reserved for the small scale sector. A non-small scale manufacturer, which has FDI investment, can manufacture items which are within the reserved category for the sector provided that it obtains an industrial licence and undertakes to export 50 per cent of its products.
Under the new proposal which has been cleared by FIPB, STPL will now be converted from an operating company to a holding company.
STPL, which earlier had a franchise agreement for operating the Marks and Spencer brand name in India, is owned by Planet Retail Holdings, a company in which Kishore Biyani’s Pantaloon has a 49 per cent equity, while the rest is owned by NRI businessman V P Sharma.
Marks and Spencer has been operating in India for a couple of years under a franchisee agreement. This deal was not considered as FDI as the investment made was on a non-repatriation basis. However, with the government liberalising its FDI policy in retail and allowing foreign brands to pick up up to 51 per cent stake in single brand retail outlets, the UK company tied up with Reliance.