Videocon puts plans to sell Next chain on hold

Potential buyers have doubts about FDI policy, says group chief

Consumer durables to oil conglomerate Videocon Group has put on hold its plans to sell stake in electronics and durable chain Next as potential buyers have sought clarity on the conditions put by the government while allowing foreign direct investment in multi-brand retail.

The group was looking to sell 26% stake in the business initially and sell 51% stake in the chain eventually by December last year. But the potential buyers—two US retailers and two European firms_ have raised doubts on the conditions put by the government while allowing foreign companies to invest in Indian multi brand retail, said Venugopal Dhoot, chairman of Videocon group.

“We wanted to close the deal by December last year but there is no clarity on FDI. Only a few states have said yes to the new policy. The buyers have raised queries about the same. For the time being, the plan is on hold,” Dhoot said. Earlier, Videocon’s banker Morgan Stanley had got interests from two US retailers and two European firms to buy the stake.

“We are looking at foreign retailers with deep pockets who would grow the business and enlarge the markets for eight of our existing brands,” Dhoot said.

While Videocon has put the plans on hold, the government has not yet received any proposals from overseas retailers to invest in Indian retail as most are not comfortable with the rigid conditions put by the government, recent media reports said.

The Government has said that overseas firms should invest a minimum of $100 million in retail venture and half of which should to go in back end infrastructure in three years. It said that the companies should source one third of their products from small and medium enterprises.

Consultants also say retailers are waiting for more clarity on the issue. “Some states have said yes to FDI and some have said no. For a foreign firm which wants to go pan India, it is wait and watch for now. There have to some consensus,” said Prashant Agarwal, deputy managing director, Wazir Advisors, a retail consultant.

Heads of both Walmart, the country’s largest retailer and Tesco, have met Commerce minister Anand Sharma to seek clarity on the FDI policy.

Videocon has eight brands including Videocon, Sansui, Kenwood, Electrolux, Kelvinator among others.

Next has 700-odd stores and did a profit of Rs 26 crore on a topline of Rs 2,000 crore for the period ending December 2011. The group is looking at a profit of Rs 50 crore in 2012, Dhoot had said earlier.