Retailers seek higher foreign funding cap

Say capital crunch will ease if foreign portfolio investors are allowed to invest more

Listed retail companies see their fund crunch easing if the government increases the foreign portfolio investors’ (FPIs) cap to higher levels in these from the current 24 per cent.

According to reports, the Union government might allow FPIs to hold even majority stake in retail companies.

“It will allow more foreign investors to participate in our company. Currently, there is not much interest from domestic investors,” said Kishore Biyani, group chief executive officer, Future Group.

Biyani said his company had written to the finance ministry last year to raise the portfolio investment limit to 49 per cent.

“Our hands are always tied. Being a listed company, how else do you raise funds?” he asked.

Currently, foreign investors own 21 per cent in Future Retail, flagship company of Future Group. Biyani was, in the past, in talks with foreign retailers to sell stakes or forge partnerships but that did not fructify.

The current government is opposed to foreign direct investment in multibrand retailing, though it has not scrapped the previous government’s policy in allowing this.

Nikhil Chaturvedi, managing director of Provogue India, retailer of fashion and lifestyle products, says: “Listed retail companies can get investments from strategic investors who are ready to pay premium for the stock. When they come in, valuation of the company will go up.”

Foreign investors own eight per cent in Provogue. Biyani said e-commerce companies were raising funds from foreign investors in various ways, such as creating back-end companies and marketplace platforms. However, brick and mortar retailers do not have access to foreign capital.

Added Abhishek Ranganathan, vice-president, Phillip Capital: “There is no level playing field between e-commerce and physical retailers. If government allows foreign investors in retail companies, it helps retailers to raise more funds.”