Chances of big investments in retail sector by foreign investors bleak: Crisil

Posted By: Religare
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Chances of big investments in retail sector bleak: Crisil
Despite governments push to invite more foreign investors in the retail sector the chances of an investment are bleak over the coming 2-3 year period, according to Crisil.

As per the Crisil report, the sourcing and back-end investment requirements being laid down by DIPP "are worrisome for foreign retailers operating in retail verticals apart from food and grocery, as segments such as apparels and electronics do not require huge back-end investments.

"Uncertainty in both the global and Indian economies will delay the entry of foreign players in Indian retail in the short term," report said.

"Many global retailers are facing pressures on profitability in their home markets, and are unlikely to commit aggressive investments in foreign markets in the near future," it added.

In the event a retailer decides to invest, it will be another 2-3 years before the retailer can roll out greenfield (new) back-end and front-end infrastructure needed for a sizeable scale of operations, it added.

Commenting on the DIPP clarifications for multi-brand retail, the report said, "Foreign retailers entering India will have to commit green field investments in both back-end and front- end for at least USD 100 million.

"This, we believe, will involve a lead time of two to three years for identifying appropriate store locations and rolling out back-end infrastructure before the retailer can start operations on a sizeable scale."

"Unstable political climate" in India, in the run up to parliamentary elections in 2014, is also expected to delay investments by foreign retailers, it added.

Read more about: crisil, fdi
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