Revised FDI norms for e-commerce: Brands co-owned by Bollywood celebrities likely to get affected

The new changes in the foreign direct investment (FDI) policy for e-commerce firms are likely to harm brands that are owned by some Bollywood celebrities, a media report said.

Flipkart-owned fashion portal Myntra holds a stake in the brands launched by Saif Ali Khan, Hrithik Roshan, Deepika Padukone and Alia Bhatt, according to The Economic Times.

Last month, the government banned e-commerce companies such as Amazon.com and Walmart-owned Flipkart Group from selling products from companies in which they have an equity interest. The new rules will be applicable from 1 February.

“An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” the commerce ministry said in a statement.

The newspaper report, citing analysts, said the celebrity brands "will have to stop selling on Myntra and Jabong from 1 February unless online store operators sell their stakes in those labels."

It said that Myntra has controlling equity in Hrithik Roshan's HRX, co-owns House of Pataudi brand with Khan and holds a stake in Padukone’s label All About You. Jabong owns a stake in Bhatt’s brand.

Representational image. Reuters

Recently, the Confederation of All India Traders urged the Commerce and Industry Ministry not to allow private labels to be sold on e-commerce marketplaces and desist from extending the 1 February deadline for implementation of the changes to FDI policy for the e-commerce sector.

In a letter to Ramesh Abhishek, secretary in the Department of Industrial Policy and Promotion, the CAIT requested him to make it explicitly clear whether private labelling or branding is allowed under the foreign direct investment policy in the e-commerce sector.

“It is submitted that if it (labelling) is allowed it will run contrary to the intention of the government to make e-commerce free from evils and malpractice and to provide an equal level playing field with the fair competition.

“Such e-commerce companies will continue their ulterior motives through such loopholes as they are doing since last many years and small retailers will be killed,” CAIT alleged.

Amazon and Walmart-owned Flipkart have sought more time from the government to comply with the new changes in the foreign direct investment (FDI) policy for e-commerce firms as they find it difficult to execute the changes within the 1 February deadline set for the e-tailers.

In October last year, Myntra announced the launch of ‘House of Pataudi’, in association with Khan.  ‘House of Pataudi’ is co-owned by Myntra, Exceed Entertainment and Saif Ali Khan. It is a lifestyle brand for men and women. The range includes kurtas, sherwanis and Nehru jackets for men and kurta sets, lehengas and dresses for women. Products from the House of Pataudi are available exclusively on Myntra and Jabong.

In August 2016, Myntra acquired a majority stake in HRX, co-owned by Roshan and Exceed Entertainment. HRX, one of the first home-grown Indian lifestyle brands, was incepted in 2012 and was exclusively licensed to Myntra in 2013. In January 2018, the brand said it was eyeing Rs 500-crore turnover by 2020 from its apparels and footwear section.

"We are aiming at Rs 500 crore turnover in the next three years from the apparels and footwear section. We are in between plans to expand the product categories and offer more in the space of active wear," Exceed Entertainment Managing Director and HRX co-founder Asfar Zaidi had said.

Deepika Padukone had launched 'All About You' in 2015. Alia Bhatt launched her first clothing line 'Alia Bhatt for Jabong' with online retailer Jabong.com in 2014.

--With inputs from agencies

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