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Several single brand FDI proposals stuck with DIPP

By FashionUnited

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Fashion

Though the January 2012 single brand FDI policy allows brands to run 100 percent subsidiaries in India, they are not allowed to have a mix of fully owned stores and franchisees or engage in wholesale business in the country. And due to this, several investment proposals by

Tommy Hilfiger, Italian bag and shoe maker Furla, crystal jewellery and accessories maker Swarovski, and cosmetics companies South Korea's Innisfree and Italy's Officina Farmaceutica are stuck with the Department of Industrial Policy and Promotion (DIPP) for months.

These applicants have either proposed to enlist franchisees in India apart from having company owned stores and/or expressed their desire to engage in wholesaling. However, officials claim that the companies seem to have ignored the fact that the FDI rules differ for each type of venture and they cannot have a mix of wholesale and retail business.

Delays hold up brand's India retail expansion

It's been 18 months since US apparel company Tommy Hilfiger filed an application to form a 50:50 joint venture with Arvind, to open 500 points of sale over next 5 years. A joint venture proposal filed by Italian bag and shoe retailer Furla has been lying with DIPP for more than seven months. Furla has sought approval for a 51:49 joint venture with Genesis Luxury, which currently runs two Furla stores as a franchisee. The proposed joint venture has applied to sign up franchisees apart from having fully owned stores. While Swarovski and Innisfree have applied to start wholly owned subsidiaries in India, Officina wants to launch a JV with New Delhi-based businessman Arjun Khurana.

According to the applicants, having a combined business model makes sense when they want to open stores in smaller towns along with metros. Even a July report by KPMG said imposing such conditions on supermarket chains was a "big blow to growth in retail franchising in India".

DIPP
Furla
Tommy Hilfiger