Etailers hope for rise in FDI investment, healthy competition

BENGALURU | MUMBAI: Online retailers are anticipating a boost in overseas investments that will allow them to expand faster and in new categories, but also increased competition, after the Union Cabinet approved 100% foreign direct investment in single-brand retail through the automatic route.

Online furniture retailer Urban Ladder, which was recently granted a singlebrand licence, expects to now be able to expand more smoothly into categories beyond furniture using foreign capital without having to seek the government’s approval. But it also anticipates more competition from overseas entering the domestic market.


“There are a lot of singlebrand retailers who have wanted to foray into the Indian market,” said Urban Ladder chief executive Ashish Goel. “This move will make it easier for them and invoke healthy competition in the market.”

Urban Ladder last raised Rs 102 crore in funding from Kalaari Capital, SAIF Partners, Steadview Capital and Sequoia Capital in February 2017.

Until now, only 49% FDI was allowed in single-brand retail via the automatic route, and anything above that required government approval—a tedious process.

“The move definitely impacts investor sentiment positively. With regulatory approvals easing, the doors will open for a lot more of the foreign money to come in,” said Viraj Bahl, CEO of Veeba Foods, which makes and supplies its own brand of condiments to restaurants and fast-food chains. “This will have a positive impact on investor outlook towards India, especially on the private equity side, (which will) rub off on the larger ecosystem too.”

Online jewellery retailer Bluestone, too, welcomed the cabinet’s decision, with CEO Gaurav Singh Kushwaha calling it a good step to promote consumerism. “We can expect more activity by investors, which will help consumer brands fight against the larger (fast-moving consumer goods) players. It will also give an impetus to consumerism,” he said.

Veeba Foods last raised $6 million in October, and Bluestone, $30 million in July 2016 in funding led by IIFL Holdings and Accel Partners.

Analysts see more direct and indirect benefits flowing in from the cabinet’s decision, even if it only meets half-way a long-pending demand of the industry.

“Permitting 100% FDI in single brand retail under the automatic route should generate employment and give Indian consumers access to several international brands,” said Aashish Kasad, India region tax leader, consumer products and retail, EY India.

(With inputs from Mugdha Variyar)