Mumbai, Sep 12: The penetration of the domestic organised retail sector will increase from the current 6.5 percent to nine by 2015, if the proposed move to allow foreign direct investment (FDI) in retail sector is implemented quickly, according to leading rating agency Crisil.
The organised retail market is expected to be Rs 3.5 lakh crore from the present Rs 1.4 lakh crore, the agency said in a report.
The domestic retail market currently is estimated to be Rs 21.6 lakh crore and by 2015 it is likely to touch Rs 37 lakh crore, Crisil added.
The government is in the process of allowing 51 percent FDI in multi-brand modern retail, though a consensus is yet to be reached.
“Today there is moderate competition; we feel there will be increased competition very soon. Once foreign players enter, the competitive landscape is expected to change,” Crisil Head for Industry Research Ajay D'Souza told reporters here.
Crisil envisages the competition to be higher in metros during the next five years as it expects hypermarkets to open more stores in these areas initially.
“In future, we see expansions in the hypermarket formats. In case of speciality stores, action will be focused in apparel, footwear, jewellery and to a lesser extent consumer durables. The competitive landscape is going to be much higher in cities.
In terms of the metros and mini-metros, if we look at the seven large cities (Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad and Pune), we believe the organised retail penetration is going to grow the fastest in the next five years.
“We expect organised retail penetration in these cities to be close to 33 percent by 2015 from the current 28 percent in FY11. In tier-1 and tier-2 cities it won't be that large relative to these seven large cities,” D'Souza added.
The Committee of Secretaries (CoS) is understood to have suggested opening up of multi-brand retail sector to foreign investments with a cap of 51 percent and a minimum investment of USD 100 million in backend by interested overseas players.
According to this proposal, a foreign retailer, however, would have to invest at least USD 100 million, and 50 percent of FDI component will have to be deployed in the back-end infrastructure, like warehousing and cold storage. The CoS also recommended that FDI be allowed only in 36 large cities, which have population of over a million.
At present 100 present FDI is allowed in cash-n-cash retail or whole sale retail and in single brand front-end retail but not in multi-brand front-end retail.
Many global retailers like Wal-Mart from the US, Tesco from England and Germany's Metro among others are waiting in the wings for a full-scale entry into the country, dominated by mom & pop stores.
Among these three, Wal-Mart is already present in the wholesale retail through a JV with Bharti Group, while the German Metro is present on its own in the country with its wholesale business. PTI
