MUMBAI, July 25 (Reuters) - Spain's Inditex S.A.,
the world's largest clothing retailer, hit an investment
roadblock in India as the government gave the thumbs-down to its
plan to sell Massimo Dutti apparel following the success with
its flagship Zara brand.
An application by Inditex unit Zara Holdings BV to sell a
more upscale brand through a joint venture with Tata Group's
retail arm, Trent Ltd, was rejected by the Foreign
Investment Promotion Board (FIPB). The board didn't explain its
decision, announced late Tuesday.
In January, India allowed foreign single-brand retailers to
set up wholly-owned operations in India, but a requirement that
companies source 30 percent from small local firms has
discouraged retailers from applying.
Only Ikea and Pavers, a British shoe chain, have
applied so far, hoping to bank in on rising middle-class incomes
and an expanding appetite for global brands and lifestyles.
Earlier, the FIPB, which clears foreign direct investment
proposals, had put the application on hold, citing violation of
a rule that says an investor must own the brand it is proposing
to bring to India, according to media reports.
Inditex has maintained that Zara Holdings BV is a
wholly-owned subsidiary of Inditex, and that both it and Zara
Holdings own the Grupo Massimo Dutti brand, despite the proposed
joint venture with the Tata unit, media reports have said.
Inditex could not be immediately reached for comment.
(Reporting by Nandita Bose; Editing by Ryan Woo)