CAIT Raises Objection on Aditya Birla & Flipkart Deal for Violating FDI Norms

The traders’ body Confederation of All India Traders (CAIT) has raised questions on the deal between Aditya Birla Fashion Retail (ABFRL) and Walmart owned Flipkart. The objections is raised over ABFRL’s plans to raise Rs. 1,500 crore by issuing 7.8 percent stake to Flipkart Group, alleging that the proposed deal violates the government’s FDI policy.

CAIT wrote to Commerce Minister Piyush Goyal in this regard urging him to prohibit ABFRL from directly or indirectly selling its inventory on the marketplace platforms owned/controlled by the Flipkart Group. In the letter the traders’ body wrote “the deal is in complete violation of the revised Foreign Direct Investment (FDI) norms notified by the government in Press Note No. 2 of 2018 of the FDI Policy”. CAIT also requested the minister ‘to not allow the proposed FDI unless they undertake that ABFRL will not be selling its inventory through any of the marketplace platforms owned/controlled by Walmart-owned Flipkart Group’.

Regarding the objection, ABFRL did not immediately

ABFRL stated it plans to use this capital to strengthen its balance sheet and accelerate its growth trajectory

offered any comment. However, last week, ABFRL said that its board approved the proposed stake sale. The company stated it plans to use this capital to strengthen its balance sheet and accelerate its growth trajectory. ABFRL also stated that the company has entered into a commercial agreement in relation to the sale and distribution of its various brands. The transaction is subject to regulatory and other customary approvals.

“In its filing to the stock exchange, a clear intent to make ABFRL a preferred seller on the marketplaces owned and operated by Flipkart Group is shown which strictly violates the policy of the government,” CAIT stated in the letter. The traders’ body stated that the present FDI policy clearly prohibits a foreign company to venture in any forms of multi-brand retail trading (MBRT) including through e-Commerce by having any equity interests in the sellers on the market-platform, or directly/indirectly controlling their inventory through side agreements, or under the garb of B2B e-Commerce. CAIT also stated “the restrictive provisions in FDI policy, through Press Note No. 2 of 2018, were made to protect the small traders/kirana shopkeepers and Indian industry from the onslaught of capital duping by foreign multinational companies and any violation of such provision must be strictly dealt with”.