12 Nov 2015 12:20 IST

New FDI norms will help banks, media cos

Open doors for MNC majors Apple, Nike, Adidas

The Centre’s decision to relax Foreign Direct Investment rules across 15 sectors on Tuesday is expected to benefit a diverse set of companies from banks to media outfits, including Kotak Mahindra Bank, NDTV, IKEA, Reliance Defence and DLF.

The new rules could also attract fresh investments from multinational giants, such as Apple and Time Warner, which have been wanting to set up operations in India.

Take the case of the banking sector, where foreign investors can now own up to 74 per cent stake without any distinction between portfolio and direct investment.

This will help players such as Axis Bank, YES Bank and Kotak Bank as foreign holdings in these banks are under 50 per cent now.

According to Parag Jariwala, Vice-President – Institutional Research, Banking and Financial Services, Religare Capital Markets Ltd: “Though there is no immediate benefit for other private sector banks as they are outside FII restriction as of now, this is a positive for private sector banks like YES and Axis. They now have a better chance to get included in the MSCI Index for a longer period on merger of foreign portfolio and direct investment limits.”

Media and broadcasting companies, especially cash-strapped ones, are the other gainers with the Centre raising the FDI cap in news channels and FM radio from 26 per cent to 49 per cent; and to 100 per cent for digital cable and DTH companies. Players such as Hathway, Videocon and Radio Mirchi could generate interest from foreign investors.

Sudhanshu Vats, Group CEO, Viacom18, said this enhances the ease of raising capital. “The media and entertainment industry will see accelerated investor interest,” he said.

Apple, Nike, Adidas and other single-brand retailers can not only set up their own stores but also sell through their own platforms under the revised norms. That’s because a requirement to source at least 30 per cent of the input locally has been relaxed for high-tech products. Apple, for example, operates in India through franchisees currently. Non-tech companies have been allowed more time to comply with the local sourcing requirement.

Cheer for realty players

For the real-estate segment, the decision to remove strictures related to area restriction of floor area and minimum capitalisation will help bring some cheer to an otherwise gloomy sector. Companies such as DLF have been looking to sell stake in units to trim its growing debt.

“The significant reforms announced today can be said to be the biggest relaxation to the FDI policy for the real estate sector since the opening up of this sector for FDI in 2005. The policy changes are going to be a game-changer and will fuel the growing appetite in the Indian and international investment community for investments in completed commercial buildings,” said Kalpesh Maroo, Partner, BMR & Associates LLP.

The big misses, however, include reforms in multi-brand retail and investments into e-commerce segment.

Companies, such as Walmart and Amazon, have changed their business models in India because the existing FDI rules do not permit them to operate the way they do in other countries.

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