OVERSEAS INVESTMENT

(may-june2010)

FDI in multi-brand retail set to get 100% backing

The commerce and industry ministry is likely to propose 100% foreign direct investment (FDI) in multi-brand retail, opening the doors to the likes of Wal-Mart and Tesco, but will suggest stiff local sourcing requirements and mandatory investments in backward linkages. We are preparing the paper that will be placed for public debate in some time, a senior official of the department of industrial policy and promotion (Dipp), the nodal body for foreign investment policy, told. Though the earlier view within the department was to keep the FDI limit at 51%, same as in single-brand retail, it has veered around to keeping it much higher and even pegging it at 100% to have an intense debate on the subject, he added. A final decision on the proposed cap will be taken after deliberations with the consumer affairs ministry, the nodal department for retail, he said. Interestingly, in another paper on FDI in defence, the department has proposed foreign investment up to 74%. The paper on retail will be the second in a set of six discussion papers proposed to be put out by Dipp. The paper is also expected to make it mandatory for big multi-brand foreign retailers to create a back-end cash-and-carry for small shopkeepers, giving them benefit of scale on the sourcing side. The idea is that big multi-brand retail outlets should enable growth of small retailers and not threaten their existence, the official said.

Forex reserves marginally up

Reversing the trend, India's foreign exchange reserves inched up marginally to $273.364 billion during the week ended May 21 compared to USD 273.300 billion, a week earlier. 3 The forex reserves of the country have gone down by nearly USD 6 billion in the previous two weeks, due to the depreciation of major global currencies and possible dollar sale by the RBI in the market to support rupee. Foreign currency assets, during the week, went up to USD 248.637 billion as against USD 248.597 billion in the previous week, the RBI said in its weekly report. Foreign currency assets expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies, such as euro, sterling and yen, held in the reserves, the RBI said. During the week, gold reserves remained static at USD 18.537 billion, while the country's special drawing rights slightly improved to USD 4.877 billion, the RBI said. India's reserves position in the International Monetary Fund also went up to USD 1.313 billion from USD 1.308 billion a week ago, the RBI said.

Govt clears FDI proposals in 7 media cos

The government has cleared foreign investment proposals of seven media and entertainment companies to bring in Rs 472.48 crore, but deferred a decision on four others, including Zee Entertainment and Jagran Media. The other two media proposals deferred were from INX Media Pvt Ltd and Sea TV Network Ltd, the Finance Ministry said in a statement. The spate of FDI proposals in the Indian media and entertainment arena come at a time when the sector is projected to double to more than USD 24 billion by 2014, up from USD

12.9 billion in 2009. Overall, 17 FDI proposals from various sectors were okayed for bringing in Rs 569.41 crore, while 20 were deferred and nine rejected. Besides media, quite a few of other proposals deferred were from the booming telecom and technology sectors. The decisions on foreign investments are based on the recommendations of the Foreign Investment Promotion Board (FIPB) at its meeting held on May 31, 2010. The bulk of the investments cleared were from two media companies -- Hindustan Media Ventures Ltd (HMVL) and Turmeric Vision Pvt Ltd (TVPL). While HMVL, the publisher of Hindi daily 'Hindustan', will bring Rs 350 crore in foreign investment from FIIs and venture capital funds, TVPL's proposal entails FDI of Rs 122.10 crore for foreign equity in a 24-hour food TV channel. 5 UTV News Ltd's Rs 34 lakh FDI for up-linking and broadcasting content on its news and current affairs television channel was also cleared by the government. The other media proposals okayed were those of Haymarket Media to publish specialist magazines (Family Physician and FourFour Two), Mid Day Multimedia, Clear Channel Mumbai Pvt Ltd and Universal Music India Pvt Ltd. As for other sectors, the government cleared Rs 36.76 crore FDI in Geomysore Services (India) Pvt Ltd to undertake minerals exploration and mining of gold nickel, platinum, diamonds, copper and zinc. It also okayed C&J International's proposal for a Rs 19 crore foreign investment to set up a JV for retail trading under a single brand, as well as Strawberry Constructions Pvt Ltd's proposal for Rs 25 crore FDI. In the agriculture field, it approved the Rs 15.28 crore proposal of Valuable AG-Bio Pvt Ltd for investment in floriculture and horticulture.

Forex reserves rise $1.69 b

Foreign exchange reserves were up by $1.69 billion to $272.783 billion, for the week ending June 11, on account of revaluation gains. The reserves have risen after having fallen for two consecutive weeks. For the week ended June 4, forex reserves fell by $877 million to $271.093 billion. According to figures released in the Reserve Bank of India's weekly statistical supplement, in the week , foreign currency assets were up by $1.689 billion to $247.241 billion. Foreign currency assets expressed in dollar terms include the effect of appreciation or depreciation of non-US currencies. In the week under review, the euro had recovered its losses against the greenback, said a dealer with a public sector bank. Gold reserves were unchanged at $19.423 billion. SDRs were up by $1 million at $4.821 billion. The reserve position in the IMF was unchanged at $1.298 billion.

FDI lock-in for hotels & tourism projects to go

In an attempt to accelerate foreign investment in the countrys hospitality sector, the government has decided to exclude hotel and tourism projects from the purview of the three-year lock-in clause which governs real estate activities. The move is expected to give a fillip to the plans to increase the number of hotel rooms in the country manifold, besides enabling domestic realty majors to induct foreign partners in their projects. Companies like Unitech and DLF, who have lined up massive projects in the hotels and tourism sector are keen to supplement liquidity with foreign funds. Currently, foreign direct investment (FDI) norms forbid foreign investors from repatriating profits back home for three years if investments are made in real estate projects including hotels and tourismrelated ventures.

According to official sources, in order to avail of the proposed relaxation, projects must earmark a minimum 50% of built-up space for hotel and tourism activities, including beach resorts, restaurants and tourist complexes, and at least 20% for developing hotel rooms. The move will also benefit firms that incorporate hotel projects in their real estate projects. However, the proposed relaxation would not apply to FDI in housing projects and office and shopping complexes. Current norms stipulate a minimum developable area of 25 acres and a minimum capitalisation of $10 million for wholly-owned subsidiaries of multinational companies and $5 million for joint ventures investing in real estate. Foreign investors are also not allowed to exit such projects before three years of completion of the project.