Monday, November 23, 2009

FIPB defers Gucci’s stake buy proposal

Italian designer goods maker Gucci’s proposal to pick up a majority stake in its Indian franchisee has been deferred by the government after Department of Industrial Policy and Promotion (DIPP) sought further examination.

Gucci had approached the Foreign Investment Promotion Board (FIPB) with a proposal to pick up a majority 51% stake in its Indian franchisee, Luxury Goods Retail Pvt Ltd (LGR). The proposal sought equity participation by Gucci Group NV, Netherlands, for retailing Gucci brands in the country and it would have resulted in FDI inflow of Rs 1.04 crore.

Luxury Goods Retail Pvt Ltd currently retails products under Gucci brand in India. Sources said Department of Economic Affairs (DEA) — despite granting no-objection to the proposal — asked DIPP to examine the foreign holding in LGR, apart from looking into some other issues. DIPP requested for time to further examine the proposal, following which Foreign Investment Promotion Board decided to defer it.

India currently allows 51% foreign direct investment in single brand retail but none in multi-brand retailing. Gucci India entered into a franchise agreement with Murjani Retail on January 9, 2006 for sale of Gucci products. The pact was terminated on July 31, 2009 and replaced with a new franchise with the investing company.

Gucci product are sold in over 50 countries through stores owned by Gucci Group and also through franchisee agreements.


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