Transcript - Luthra & Luthra

LEVERAGE YOUR STATUS QUO
FRANCHISE KNOWLEDGE SERIES : FRANCHISE INDIA
2013
By Aparna Mittal
Partner
Corporate / M&A /
Franchise and Retail
October 20, 2013
New Delhi | Mumbai | Bangalore
© Luthra & Luthra Law Offices
www.luthra.com
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RETAIL SECTOR IN INDIA: A PHENOMENAL
GROWTH STORY
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Indian retail market estimated to be USD 500 billion
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One of the top five retail markets in the world.
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Accounts for 14-15% of India’s total GDP.
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Organized retail sector growing at 20% growth rate per annum.
© Luthra & Luthra Law Offices
www.luthra.com
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LEVERAGE YOUR STATUS QUO
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Understanding Potential of the Business and the Markets
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Understanding the Regulatory Framework
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Commercial Due Diligence on the Market
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Forward Looking Financial and Strategic Business Plan
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Identification of partner : Goals, Synergies, Ethics and Long term Strategy
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Pure Franchise : No equity or financial investment from franchisor
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Joint Venture (franchise / brand license and financial investment- equity vs debt )
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FOREIGN DIRECT INVESTMENT
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Foreign Direct Investment Policy
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Automatic Route vs Approval Route .
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Sectoral Caps – Depending on industrial sector (hotel, food, retail etc).
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Upto 100% FDI, under the automatic route, in wholesale trading (with conditions)
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Upto 49% FDI, under the automatic route, in single brand retailing (with conditions)
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Upto 51% FDI, under the approval route, in single brand retailing (with conditions)
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Upto 100% FDI, under the approval route, in single brand retailing (with additional
conditions)
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Upto 51% FDI, under the approval route, in multi brand retailing (with conditions)
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KEY ISSUES : GROWTH & EXPANSION
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Funding :
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Access to domestic market
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External Commercial Borrowings (eligibility issues and end use restrictions)
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Financial Investment by Franchisor (including staggered buy outs)
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Third Party / Private Equity Funding : Viability and Terms
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KEY ISSUES : GROWTH & EXPANSION
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Private Equity Funding :
•
Viable route for funding
•
Global best practices
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Corporate Governance
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Long term value creation
•
Window dressing for going public / strategic sale
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KEY ISSUES : GROWTH & EXPANSION
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Defining scope of the alliance
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Allocation of Responsibilities and Degree of Control
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Duration and Milestones
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Investment Outlay and Funding Commitments
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KEY ISSUES : GROWTH & EXPANSION
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Non compete : Products, Activities, Duration, Geographical Extent
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Thresholds for Performance and Creative Solutions
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Right of First Refusal for new business / products/ activities
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Termination and Exit
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Intellectual Property Rights and Protection
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Thank You
Aparna Mittal
Partner
Email: [email protected]
© Luthra & Luthra Law Offices
www.luthra.com
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