Reports suggest that DIPP has proposed foreign direct investment (FDI) ceiling of 51 percent in multi-brand retail be made composite cap.
Govt must impose restrictions only on food side of retail
The Modi government may be considering allowing foreign portfolio investors to own majority stake in retail companies. Reports suggest that Department of Industrial Policy and Promotion (DIPP) has proposed foreign direct investment (FDI) ceiling of 51 percent in multi-brand retail be made composite cap.
An inter-ministerial note has been floated by DIPP with approval from commerce and industry minister. There has been proposal seeking to do away with the different kinds of overseas investment and bring about clarity in the norms. However, FII or FPI investment beyond 49 percent will be required to go through government route and performance-linked conditions will apply.
The move would attract significant investments to the country, but how much boost will this provide to retail companies?
Discussing the issue, Kishore Biyani, CEO, Future Group, said the company had written to the Finance Ministry last year seeking permission to raise its portfolio investment limit to 49 percent as RBI wanted clarification from government on enhancing the FII limit.
Foreign institutional investors (FIIs) hold 21.5 percent in Future Retail (Future Group’s flagship company), while the current limit is 24 percent.
Biyani said the company has been trying for a government nod to up FII limit for 2-3 years and that not a lack of permission has been hurting its fundraising plans.
He said the clarification will give more options to foreign investors investing in India and will give a level-playing field to domestic retail companies.
Future Retail stock price
On September 10, 2014, at 15:31 hrs Future Retail was quoting at Rs 119.00, up Rs 0.30, or 0.25 percent. The 52-week high of the share was Rs 147.85 and the 52-week low was Rs 63.30.
The company’s trailing 12-month (TTM) EPS was at Rs 3.23 per share as per the quarter ended June 2014. The stock’s price-to-earnings (P/E) ratio was 36.84. The latest book value of the company is Rs 131.65 per share. At current value, the price-to-book value of the company is 0.90.