Consumer durables-to-oil conglomerate Videocon Group has put on hold its plans to sell a 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 (FDI) in multi-brand retail.
The group was looking to sell a 26 per cent stake in the business initially and 51 per cent eventually by December last year. But the potential buyers, two US retailers and two European firms, have raised doubts on the conditions of the government’s FDI policy, said Venugopal Dhoot, chairman of the 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 added.
Earlier, Videocon’s US-based banker Morgan Stanley had got interests from the US 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.
The eight brands include Videocon, Sansui, Kenwood, Electrolux and Kelvinator.
While Videocon has deferred the plans, the government has not yet received any proposals from overseas retailers to invest in Indian retail as most are not comfortable with the conditions placed by the government, recent media reports said.
The government, while opened up multi-brand retail in September last year, said overseas firms should invest at least $100 million (Rs 530 crore today) in the retail venture, the half of which should to go to back-end infrastructure in three years. It said the companies should source one-third of their products from small and medium enterprises. Besides, state governments have the right to allow or reject FDI in multi-brand retail in their respective states.
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 Wal-Mart Stores Inc, the world’s largest retailer, and UK-based Tesco Plc, have met commerce minister Anand Sharma seeking clarity on the FDI policy.
Next has 700-odd stores and saw a profit of Rs 26 crore on a revenue of Rs 2,000 crore for the 12 months ended December 2011. The group is looking at a profit of Rs 50 crore in 2012, Dhoot had said earlier.
