Organised retail’s market share retail in India is projected to rise to 10 per cent by fiscal 2019-20 over 7 per cent last fiscal, says rating agency CRISIL. This will be backed by the decision to permit cent per cent foreign direct investment (FDI) in single-brand retail under the automatic route, relaxation in sourcing norms and healthy growth prospects.

CRISIL had expected the same to grow to about 9 per cent by fiscal 2020 before the rules changed, based on healthy revenue growth of about 18 per cent of organised brick and mortar (B&M) retailers, according to Indian media reports.

The pace of store additions by organised retailers may be faster than the annual 10-12 per cent CRISIL had presaged earlier.

The impact of relaxation in rules would be more pronounced in the apparel, luxury goods, home decor, footwear, and electronics segments, which ratchet up about 45 per cent of India’s organised retail revenues.

While FDI approval under the automatic route will lower the time to commence business, the relaxation of 30% local sourcing norms for the first five years by allowing inclusion of incremental sourcing for global operations will provide sufficient time for new entrants to set up and stabilise their sourcing base.

Healthy growth prospects for the sector and benefits of scale and focus on profitability will help offset the impact of higher capital spending and increasing competition on credit profiles over the medium term, the ratings agency believes. (DS)

Fibre2Fashion News Desk – India

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