Fund-crunch leads retailers to demand higher FPI cap

Leading listed retailers are seeking an increase in foreign portfolio

investors’ (FPIs) cap from the current 24 percent to ease their funding requirements. Sources say that the Union government is contemplating whether to allow FPIs to hold even majority stake in Indian retail companies.

Kishore Biyani-led Future Group had already written to the Finance Ministry last year to raise the portfolio investment limit to 49 percent. The debt ridden company has been trying to raise funds through various measures like selling stake in brands under its portfolio or even hiving off majority stake in its Pantaloons business. As of now, foreign investors own 21 percent stake in Future Retail, the flagship company of the Group.

The current government is opposed to foreign direct investment in multibrand retail, though it has not scrapped the previous government’s policy in allowing this. Even Provogue, in which, foreign investors hold eight per cent stake, wants more investments from strategic investors who are ready to pay premium for the stock, since it would help in increasing valuation of the company. While e-commerce platforms can raise funds through marketplace models, the way Flipkart and Snapdeal are attracting investors, physical retailers have no such model to attract foreign capital.