An In-depth analysis of the recent pronouncements on single brand retail in India. How despite the changes, very little has changed.

1. India Newsflash
Foreign Direct Investment
: Single Brand Retail
Background
The Department of Industrial Policy and Promotion (“DIPP”) of the Ministry of Commerce and
Industry vide Press Note No. 1 (2012 Series) dated January 10, 2012 (“PN 1”) has permitted 100% FDI in
single brand product retail trading under the Government route i.e. with the prior approval of the
Secretariat for Industrial Assistance and the Foreign Investment Promotion Board. While the present
stipulations remaining untouched, the decision to increase the extant limit of 51 percent to 100 percent
has been introduced with a rider forcing brands to locally source from small and village industries,
30% of the value of the products sold by them.
The single brand market in India is currently valued at $7 billion and is expected to reach $25 billion
over the next five years.
Threshold
Old : 51% New
:100%
Conditions
•Products sold should be of “Single Brand” only.
•Products should be sold under same brand internationally.
•Investor should be owner of the brand.
•Products should be branded during manufacturing.
•Sourcing of at least 30% value from Indian SSIs
•Investment only after Government approval.
•Any addition in product categories to require additional approval.

2. India Newsflash
Foreign Direct Investment
: Single Brand Retail
Small Print
“Small Industries” have been defined as industries which have a total investment in plant & machinery
not exceeding US$ 1.00 million. This valuation refers to the value at the time of installation, without
providing for depreciation. It has been further provided that if, at any point in time, this
valuation threshold is breached, then the industry shall cease to qualify as a 'small industry'.
“Village industry” has been assigned the same meaning as under the Khadi and Village Industries
Commission Act, 1956, as amended from time to time.
“Value of products sold” While DIPP mandates sourcing of 30% of value of products sold from
within India, However, it is unclear, as to whether 30% refers to the cost price or the selling price of the
products, both having its own set of lacunas.
“Owner of the Brand” It is common for companies to hold their intellectual property including brands,
in separate IP holding companies or group entities for IP and/or tax purposes, The requirement for the
FDI investor to own the brand diminishes the structuring flexibility otherwise available while making
investments.
“Single Brand” It is not clear if there may be a single brand with several sub-brands under them, this
should be clarified by the government to allow investors to comply with the policy.
Policy Document http://dipp.nic.in/English/acts_rules/Press_Notes
/pn1_2012.pdf

3. India Newsflash
Foreign Direct Investment
: Single Brand Retail
Opinion
The raise in FDI cap is a welcome step for the retail industry and a much needed shot in the arm for the
economy as whole, in times of regulatory log jam. However, the imposition of mandatory sourcing
requirements severely limits the benefits of such relaxation. The legislation in its current guise only
favors those retailers who have established supply chains in the country involving small scale and
village industries as envisaged by the announcement.
The government must re-visit the sourcing clauses and make the legislation more business friendly to
enable greater participation in the Indian retail story.
Greater light should be set by the lawmakers on the points mentioned before which could prove
contentious in the future.

4. India Newsflash
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