Nike files for FDI, as govt revisits policy

A senior DIPP official says now, an international company like Nike could operate both fully-owned and franchisee outlets

American sportswear company Nike has approached the Department of Industrial Policy & Production a second time within a year, seeking to open fully-owned stores in India.

There’s reason for the $25-billion chain to come back to the government even as its application was not cleared last year: a senior DIPP official said now, an international company could operate both fully-owned stores, as well as franchisee outlets in the country.

In an application in August 2014, Nike had sought to set up fully-owned stores to expand its operations in the country.

But it also wanted to retain its 400-plus franchisee outlets.

The government, however, turned down the proposal, as the single-brand retail policy did not have room for a combination of businesses; the company was told to choose between the two.

Since then, there’s been a change in the government’s approach towards single-brand retail, as the Centre sought to attract major international brands.

Nike’s second application is from its subsidiary Nike European Operations Netherlands BV.

This was filed on July 31, less than a year after Nike Inc’s proposal.

Last month, Nike’s German rival, Adidas, also applied; it sought to open own stores, with 100 per cent foreign direct investment, while retaining its franchisee outlets. Sources said Adidas’s proposal might have encouraged Nike to try a second time.

A mail seeking Nike India’s comment on its application remained unanswered till the time of going to print.

It is learnt the American chain, which entered India in the 90s, is keen on setting up concept stores and flagship outlets across the country to tap the opportunity in the sportswear market, estimated at about Rs 6,000 crore (Rs 60 billion) and growing 13-14 per cent a year.

Nike has about 400 stores in India, said sources, against Adidas’s 500 and Reebok’s 250 (also owned by Adidas, but run as a separate brand), all running on the franchisee format.

Another major company in this segment, Puma, has 330 stores, a combination of company-owned-and-operated and franchisee ones.

As it has no stores of its own, Nike has attempted to ramp up retail presence in India through arrangements with multi-brand store operators, besides franchisees.

Through this, the company has been able to up increase its retail presence from 2,000 stores a few years ago to about 4,000 now.

These stores include multi-brand ones, as well as standalone franchisee outlets.

Though the government has contended the current single-brand FDI policy doesn’t have any room for a mix of business and that international chains must pick either of the two formats, it is now relaxing its stand on certain norms in the sector.

International chains, while wanting to expand through fully-owned stores, are keen to retain the franchisee format, as this offers another window of growth and opportunity.

Single-brand retail has been in the news in recent weeks. Besides Adidas’s application to DIPP, Swedish furniture maker IKEA announced the purchase of a 13-acre plot in Hyderabad for its first India store, more than three years after it filed it’s a Rs 10,500-crore proposal.

Swedish fashion chain H&M, waiting for more than two years, is learnt to be actively signing real estate leases to open 30 stores through the next few months.

In 2012, the government allowed 100 per cent FDI in single-brand retail but imposed conditions on foreign investment exceeding 51 per cent.