Speaking to CNBC-TV18, Gupta says the government, however, needs to clarify on Brownfield and Greenfield investments too.
Also read: Retail FDI cheer: Carrefour likely to foray into India
\\\"All the press releases seem to suggest that they will be investing in the existing Trent Hypermatkets Ltd, which is an exiting company which already operates 16 stores. I wonder therefore whether this is truly Greenfield or whether the government will permit some sort of Brownfield acquisition of stake in the existing retail businesses," adds Gupta.
Below is the edited transcript of the interview to CNBC-TV18.
Q: Are you surprised, the mood seems to have swung to the fact that atleast till the elections are over we are not really going to see any big ticket investments coming in atleast as far as multi-brand retail is concerned. Several meetings, several rounds of consultations finally Tesco makes up its mind and Carrefour may infact follow, are you surprised?
A: It is an interesting move. I don't think the government was really expecting it. Given the current dynamics of both political and economic environment, it is interesting that someone should foray into this sector with all the dichotomy in the guidelines and so on and so forth.
However, it is a small step that Tesco has taken today by announcing a USD 110 million investment. So, it is not as if they are laying out billions of dollars to start with, although it is very positive for the government and very positive for India as such.
Q: What could have changed because we have heard from companies like Tesco in the past, they had issues with the sourcing requirements, they had issues with produce and what could actually classify as being sourceable products, what do you think has really changed for somebody like Tesco to finally knock on the governments doors and knock on the FIPBs doors?
A: Government was pretty clear last time around. The government said they have done what they had to do. They had a September 2012 policy, they had some clarifications therein on. The government was very interactive with all these retail players but the government seems to have indicated last time that they have drawn a line.
One thing that I do find interesting about this proposal though is that all the press releases seem to suggest that they will be investing in the existing Trent Hypermatkets Ltd, which is an exiting company which already operates 16 stores. I wonder therefore whether this is truly Greenfield or whether the government will permit some sort of Brownfield acquisition of stake in the existing retail businesses. So, that part to me is a little bit unclear.
The government would have thought through this and before putting in the application this discussion would have happened with the government.
Q: Do you think a clarification on Brownfield investments is perhaps in the offing. Ofcourse it may have been informally discussed but given the way that this transaction has been outlined do you believe that there is a clarification likely as far as Brownfield investments are concerned?
A: Potentially, yes. The reason being that the original September 2012 policy which is the policy that went through Parliament and through the challenge in the Supreme Court also infact carried no restriction on Brownfield investment.
It is only when the government came out with its FAQs in June or July of 2013 that they inserted a sentence – a vague sentence to say that front-end retail stores must also be setup as an additionallity and not through acquisition of existing stores.
That sort of indicated that all so-called conversations that were happening between the Future Group and possible retailers etc would not have to come to a standstill because Brownfield investment would not be permitted.
The fact that this press release both from Tesco and from Trent is fairly clear that there will be an investment in the existing companies and therefore some stake will be taken up in the existing 16 stores seems to suggest that the government has moved on this.
I do believe that the government has the leeway to move on this because the so called Brownfield restriction really comes only from a FAQ kind of clarification that the government issued not from the original policy. So, the government perhaps has that leeway.
Q: Do you believe now that the road is in that sense clear for Carrefour and Kishore Biyani to move forward?
A: I would not go so far as to say that. Let us wait and watch. The press release very nicely says that we will keep you posted on the status of the application. So, let's see how this application goes. Let the government apply its mind little bit on this and also the logic of that one sentence that they had in their FAQ and then let's see what happens.
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