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Friday 25 November 2011

FDI in retail: Shares of Pantaloon Retail, Shopper's Stop, Trent rally after decision
 Indian retailers jumped on Friday after the government moved to open up the supermarket sector to global giants, a decision seen prompting a flurry of investments and tie-up opportunities for local players. 

The government on Thursday approved 51 per cent foreign direct investment in multi-brand retail, paving the entry of international firms such as Wal-Mart, Tesco and Carrefour into the $450 billion market. 

"FDI in multi-brand retail would benefit capital-constrained retailers such as Pantaloon Retail," Wall Street bank JPMorgan said in a research note on Friday. 

"Accelerating the pace of investment in the supply chain to meet demands of increasing scale and enhancing efficiencies... besides expertise of foreign retailers." 

Shares in Pantaloon Retail (India) jumped as much as 18.2 percent, Shopper's Stop rallied 11.4 percent, andTrent, part of the salt-to-steel Tata Group conglomerate, rose 17.2 percent. 

In comparison, the main stock index was down 0.7 per ent at 9:35 a.m. (0405 GMT). 

The government said late on Thursday that would also raise the cap on foreign investment in single-brand retailing to 100 per cent from 51 per cent. 

The cabinet decision, confirmed to ET by several ministers who attended a late evening meeting and set to be formally announced by the government in Parliament on Friday, provided the spark for a series of realignments in the country's fledgling organised retail sector. For instance, the world's biggest retailer Walmart indicated that it would extend its 'back-end' partnership with the Bharti Group into front-end retailing soon, possibly by picking up a stake in Bharti Retail. 

The government's decision is fraught with great political risk during what is perhaps the weakest phase in its nearly eight years of governing India. The proposal was opposed by two constituents of the ruling coalition - Trinamool Congress and the DMK, a senior cabinet minister said. 

The government's decision to press ahead in the face of opposition won it plaudits from industry, especially at a time it has been pilloried for indecision and policy paralysis.

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