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UPDATE 1-Europe's H&M aims to set up shop in India

Source : REUTERS
Last Updated: Wed, Feb 20, 2013 05:40 hrs

* CEO meeting trade minister on Tuesday

* Analyst says move makes sense (Adds background, analyst)

By Anna Ringstrom and Veronica Ek

STOCKHOLM, Feb 19 (Reuters) - European budget fashion retailer Hennes & Mauritz said it will apply to open stores in India, the third-biggest economy in Asia, as it seeks to expand into faster-growing markets.

The Indian government has been pushing through reforms to allow foreign retailers into the country to help stimulate the economy.

Like Swedish furniture maker IKEA, which is waiting for its own application to be approved, H&M hopes to cash in on a growing urban middle-class with a strong demand for western-lifestyle products.

H&M, the world's second-largest apparel retailer after Zara owner Inditex, has the bulk of its business in Europe where demand has been hit by the region's debt crisis.

A spokeswoman for Sweden-based H&M said Chief Executive Karl-Johan Persson would meet Trade Minister Anand Sharma in India on Tuesday.

"We will now present H&M and our plans for India. We are interested in opening stores there. What we are doing now is preparing to apply to start a wholly-owned subsidiary," spokeswoman Kristina Stenvinkele said.

India last year formally eliminated restrictions on foreign investment in its single-brand retail sector.

Foreign retailers that want to invest beyond the previous cap of 51 percent ownership will need to source 30 percent of their goods locally.

Sanford Bernstein analyst Jamie Merriman said it made sense for H&M to start the application process as the Indian market was attractive, albeit complicated, for retailers.

"Although, if you think about how long it takes H&M to build up scale in most markets it's probably going to be a while before that would happen in India," she said. (Reporting by Veronica Ek and Anna Ringstrom; Editing by Erica Billingham)




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