FDI will not change retail stocks materially: Angel Broking

In a chat with ET Now, P Phani Sekhar, Fund Manager-PMS, Angel Broking, shares his views on FDI in retail.

ET Now: There are increased talks about FDI in retail going through or at least Congress ruled states are going to implement that. Do you think that it would be a smooth sailing this time around and which retails stock is looking strongest to you?

P Phani Sekhar: If you divorce politics out of it, it should be a smooth sailing because it is an administrative action which does not require legislative approval. But, Kerala, which is the Congress ruled state, has come out openly saying that they do not want FDI in retail. However, Kerala has not such a big presence in organised retail, so will not make that much of difference. If it happens in Congress ruled states, it will be a huge welcome sign and it will be an addition to a series of measures that New Delhi has taken in the last 15 days, in an effort to win the battle of perception because that is what they had lost hopelessly in the last one year. So, if they make a good beginning gaining some brownie points on the perception front. Then they buy more time to act, which is so much crucial in our scheme of things.

ET Now: Assuming we get an approval or the cabinet in principle approves FDI in retail, how will that change the life for retail stocks and then for Indian markets?

P Phani Sekhar: That may not change the life materially for retail stocks on the ground because then you need maybe at least two companies. One, that will do business with foreign partners in the Congress ruled states or states that approve this retail FDI. And then there is the other entity which does business in other states. It is going to be a huge nightmare from an accounting and organisational perspective. Companies like Pantaloon, which have actually lighten their debt so much in the last six months, go for these kind of things. I also do not see why there should be a very strong foreign FDI interest coming so quickly in many of these companies. So as I have said before, this is more of a perceptional change which will be welcomed by investors in the hope that over a period of time, there will be wider acceptance of FDI in retail which will roll out across all states. So from a perception point of view, this will make a difference. This might slightly inch of the multiples of these companies but I do not see a deluge of dollars flowing into the country or many deals being signed in the next six months or so, assuming that it happens today.