ru-Net invests in two Indian fashion e-retail sites

Russian company ru-Net has become the first

foreign company to invest in an Indian online retail company. The Moscow-based internet and technology investment company invested $17 million (Rs 95.2 crores) in Freecultr and BeStylish, two e-commerce websites backed by the Smile Group. This was also the first time a Russian company invested in India’s internet space.

E-commerce companies operating in India are governed by the same FDI (foreign direct investment) rules as other brick-and-mortar retail chains. At present, multi-brand retail chains are not allowed any FDI, while single-brand outlets can get foreign investment up to 100 per cent. But online players are known to be running on foreign funds, mostly of international venture capital and equity funds. E-commerce or online chains structure the investment in such a way that front-end billing to customers is not done by companies that have foreign funds. As foreign investment is allowed for back-end operations, as opposed to front-end retailing, e-commerce companies typically work around these rules.

ru-Net invested $9 million (Rs 50.4 crores) in Freecultr and $8 million (Rs 44.8 crores) in BeStylish. While Freecultr is an apparel designing and retailing company, which was recently in the news for its merchandising tie-up with Bollywood actor Shahrukh Khan’s Kolkata Knight Riders, BeStylish is a shoe e-retailing company. BeStylish sells about 1,000 pairs of shoes daily and Freecultr 190-200 pieces of clothing.