1. FDI in Multi Brand Retail Trade – The Journey
Dinodia Capital Advisors
September 2012

2. Executive Summary
 For more than a year, every problem in India has been blamed on the incumbent
government by national and international lobbies and “Policy Paralysis” has been the
reason cited for every shortfall including the falling rupee, the worsening fiscal deficit, high
inflation, high interest rates and delayed capital expenditure plans
 On September 14, 2012 the government broke the shackles and came out with the much
needed and highly anticipated reforms regarding Foreign Direct Investment (FDI) in the
Multi-brand Retail Sector (MBRT) of India with a surety of no roll – back this time
 Dinodia Capital Advisors’ view is that these reforms will create price competition and
remove the multiple layers of inefficiency between the farmers and the final retailer and
hopefully help the farmers and producers of goods realize a bigger share of the pie in
the long-run
 Given the current negative sentiment of foreign investors (post Vodafone and Draft
GAAR Guidelines) and the lack of capital inflows in India, these reforms will encourage
foreign firms to give India a serious look and encourage them to invest capital in the
country
 As foreign firms who partner with local Indian firms are able to generate profits and achieve
success in India it will encourage FDI in other sectors as well and create a positive 2
image for India globally as a good place to do business!

3. The Story So Far….
Union Cabinet approved
 51% FDI in multi-brand retail
 Increasing the FDI limit in single
brand retail to 100%
 However the implementation was
deferred, for evolving a broader
consensus on the subject
DIPP had put up a discussion
January
paper proposing FDI in multi-brand
retail
 DIPP notified the
decision to allow 100%
 FDI permitted in cash & carry, FDI in Single brand
wholesale trading comes under retail
the automatic route September
 FDI in single brand retail was
 Union Cabinet approves
permitted to the extent of 51%
100% FDI being the FDI limit in Multi
permitted in cash & brand retail of 51%
carry wholesale trading
under the government
approval route
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*DIPP: Department of Industrial Policy and Promotion

4. The Policy - Single Brand Retail Trading
EARLIER NOW
 For Single Brand Retail Trading (SBRT)  FDI in single brand retail trading is permitted
sector – only 51% FDI permitted – subject up to 100% with Government approval
to approvals and conditions such as:
 Products should be of a ‘Single  Products to be sold should be of a ‘Single
Brand’ only Brand’ only
 Products to be under the same brand  30% sourcing is to be done from micro and
in one or more countries if are sold small industries (investment in Plant and
outside India Machinery not exceeding US $ 1mm)
 ‘Single Brand’ products should be  This condition will ensure that SME sector,
branded during manufacturing including artisans, craftsman, handicraft and
cottage industry gets the benefits of
 The foreign investor should be the liberalization
owner of the brand
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5. The Policy - Multi Brand Retail Trading
EARLIER NOW
 FDI in Multi Brand Retail Trading was not  FDI in Multi Brand Retail Trade is permitted up
allowed to 51%, subject to following conditions:
 Outlets to be set up - only in cities with a
population of more than 1m (within a 10km
range)*
 Minimum investment by the foreign investor -
US $100mm and at least 30% of the
procurement of manufactured / processed
products shall be sourced from 'small
industries’ (investment in Plant and Machinery
not exceeding US $1million)
 Sourcing requirements will be checked
together for first five years – after that on a
annual basis
 Retail trading by means of e-commerce – not
permissible
 At least 50% of total FDI brought in shall be
* States in favor of FDI in MBRT - Andhra Pradesh, Assam, Delhi, Haryana,
J&K, Maharashtra, Manipur, Rajasthan, Uttarakhand and Daman & Diu and invested in ‘back-end infrastructure’** within
Dadra Nagar Haveli
three years of the induction of FDI 5
** Back-end Infrastructure includes supply chain, logistics and warehousing but
not land and rentals

6. SWOT Analysis of FDI in Retail
S W
TRENGTHS EAKNESSES
• Retail is a $450bn Industry in • High capital investment required
India in the retail sector (real estate)
• Young and dynamic manpower • Lack of trained and educated
• Highest shop density in the world work force
• High growth rate in retail & • Higher prices as compared to
wholesale trade local shops
• Presence of big industrial houses • Will mainly cater to high-end
with deep pockets consumers placed in metros
O T
PPORTUNITIES HREATS
• High employment generation in • Effect on the small retailers - local
the future Kirana stores (mom-pop stores)
• Will enhance financial condition of • Long gestation period - Foreign
farmers Retailers will take a while to adapt
• Encourage foreign capital inflows to India and generate profits
• Result in increasing supply-chain • States not buying in so
efficiency efficiencies expected may not be
• Improve Logistics & Infrastructure achieved
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7. Rough ride so far…..
 It is not easy to be successful in a place where culture, tradition and food habits change
every 124 miles
 Some of the largest and most prominent Indian business houses such as Reliance, Godrej,
RPG and the Future Group have all struggled in the Retail Industry in India 1. These large
players have lost a significant amount of money and in fact one of the leaders in the space,
Subhiksha, which at one time had almost 1,600 outlets has shut down
 India’s image is one of a “fickle policy maker” with regulations being frequently changed,
rolled back and even retrospectively amended have made investors speculative
 Subsequent populist decisions are feared, such
that the foreign retailers may not be able to
achieve dominant market positions or buy / rent at
the right locations
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In order to read a detailed report on the Indian Retail Industry please visit:
http://www.dinodiacapital.com/research.asp
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8. Hidden Opportunity despite the rough ride
 A comparison of the Retail Industry in Emerging Markets shows that India actually has the
lowest organized retail sector amongst its peers and therefore is the biggest opportunity
 India’s closest peer in terms of size of population, China, has an organized retail market that
is almost 3x the size of the market in India. A country like Brazil which is less than a 1/6th
of India in terms of population has a organized retail market of almost 6x of that of India
and mostly homogeneous tastes across the country making it easy to standardize offerings
 Indonesia which is the largest economy in Southeast Asia and often cited as replacing
India as the “I” in BRIC economies has displayed strong growth in 2011 and in the first
half of 2012 with significant growth in the Retail sector. It has only 1/5th of India’s
population and yet has a organized retail sector which is 5x of that of India
 There are two ways to look at the above data. One is to see that there are plenty of
emerging markets where more capital could be deployed in retail, but the other is to see
the hidden opportunity in investing in the retail sector in India (the 2nd largest country in
the world in terms of population) where there is a white canvas and wide spaces and the
story of organized retail can be painted in whichever way the potential foreign entrants desire
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9. Global Experience of FDI in Retail
Emerging Markets which allowed FDI in Retail with the share of
organized retail in the overall retail industry:
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Source : Goldman Sachs, Technopak

10. Steps to Establish Presence in India
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11. Proposed Business Model
Outcome:
-There is a possibility of a mutually symbiotic relationship between the
Foreign and Indian Partner to jointly harness their capabilities and create
a world-class Retailer in India, which will have the unique advantage of a
being the first mover and establishing the benchmark of excellence for the
Industry 11

12. The ride despite the speed breakers …
 There is clearly an opportunity for the Domestic Giants, Kirana Stores and the Foreign
Retailers to co-exist in India
 The Wal-Mart model, offers every-day low pricing, but are typically in far-off locations, have
a homogenous selection of products across their stores, typically need 150,000 sq feet of
space and require a car to get to. India is years away from when majority of its population
will have the ability to only shop at the Wal-Marts of the world. Competition will force the
Kirana Stores to lift their game, become more price competitive, have a better selection
of goods at lower prices and maintain proper records of customers (people will still shop
there for proximity, comfort of relationship and easy credit)
 Foreigners will bring to India their expertise and efficiency in retailing, they will invest
capital in improving logistics and infrastructure in India (for example: Cold Storage
Logistics is still almost non-existent in India) and share technology and know-how with
their local Indian Partners, but will also be able to become profitable over a period of time
as their brands and presence increase across the country
 Hopefully, the Domestic Giants will learn the best practices from their foreign counterparts
and just as in Brazil foreign retailers thrive but still a local player is the most dominant
(Pao de Acucar) India will see a much more inclusive and efficient Retail Industry
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13. The ride despite the speed breakers …
 On the whole, if India has to grow it needs capital, training
and innovation. Yes the short-term effects of the
announced reforms will be painful, but in the long-term if they
will help make Retail a more organized industry in India,
provide better quality goods at cheaper prices at
convenient locations, improve infrastructure and the
supply chain mechanism throughout the country, provide
employment and retail sector specific training to a large
population it will be a huge boon to the nation
 Foreign Retailers who are looking to make a quick profit are better off investing elsewhere. But
those who are willing to be patient and make a more long-term bet on India, definitely have
the opportunity to “HIT THE BULLS EYE.” India is a virtually untapped and a huge growing
market in terms of the Organized Retail Industry ($450bn industry, with only 5-6% organized
retail). The foreign players who are willing to learn from their mistakes in other emerging
markets and early experiences in India, go through a careful partner selection process,
understand the political / legal / external hurdles and invest with a realistic time horizon
truly have an unique opportunity to create win-win situations for all stakeholders. Several other
sectors have seen foreign entrants with a successful and profitable model in India (Dominos,
Citigroup, Honda etc). Our view is that the FDI in Retail will unfold in a similar manner in the
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times to come!

14. Dinodia Capital Advisors
Dinodia Capital Advisors
 Corporate Profile
Dinodia Capital Advisors is a Financial Consulting firm
based in New Delhi, India. It assists clients across all
industries grow, both organically and inorganically. The
firm helps clients Raise Capital. Execute Merger &
Acquisition opportunities. Restructure, Transform and
Turnaround businesses. Resolve challenging problems.
Take advantage of financial and strategic opportunities.
Balance investor expectations. DELIVER VALUE
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15. Dinodia Capital Advisors
Service Offerings
Dinodia Capital Advisors Advice Clients on :
Mergers and Acquisition Capital Raising
We help in conducting a robust scan We advice clients on their capital
of the market and selecting the most needs and find them the right
suitable buyer or seller partner who brings more than just
capital
Restructuring India Entry Strategy
We advise on business We help set up and incubate
restructurings to help achieve businesses in India, acting as a
financial, strategic and operational trusted advisors to facilitate the
efficiency India entry strategy
Organizational Turnarounds
Transformation We work closely with companies to
We work with companies to help devise and implement a
put systems, processes and turnaround strategy by plugging the
people in place to help take deficiencies of management,
advantage of both organic and technology, capital or partnerships
inorganic synergies
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16. For Further Details, Contact :
Pankaj Dinodia
Chief Executive Officer
Email: pankaj.dinodia@dinodiacapital.com
Dinodia Capital Advisors Private Limited
C-37, Connaught Place , New-Delhi 110001, Website -
www.dinodiacapital.com
Tel No: +91 11 2341 7692, 2341 5272 ,Fax No: +91 11 4151 3666
Email: dinodiacapital@dinodiacapital.com
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the use of this information. 16