Indian e-commerce giant Flipkart has decided to re-apply for a food retail licence in the country after its initial proposal was rejected last week.
The development was first reported by Reuters.
While the Indian government currently allows 100 per cent foreign direct investment (FDI) in food retail, media reports said the Department for Promotion of Industry and Internal Trade (DPIIT) turned down Flipkart’s proposal to enter the sector citing a regulatory issue.
It, however, did not elaborate on its reason.
DPIIT is a part of India’s Ministry of Commerce and Industry and is responsible for creating and implementing government policy and strategies for industrial development.
Last year, Flipkart had evinced interest in selling food products through online and mobile platforms and had sought government approval for it. The company had also set up a new local entity, Flipkart Farmermart, for the business, per a PTI report.
The rejection last week came as a big blow to retail giant Walmart that owns a majority stake in the Bangalore-headquartered firm. The former acquired a 77 per cent controlling stake in Flipkart for a whopping $16 billion in 2018.
Flipkart’s arch-rival, US-headquartered Amazon, had received the government’s approval to retail food products in India in 2017. Local startups Zomato and Grofers, too, have secured approval to enter the food retail business.
Within the food retail segment, the grocery segment is currently witnessing increased traction amid the COVID-19 pandemic. The sector, say experts, could witness significant consolidation and fundraising going forward.
The contours of the sector have changed over the past few months as people have flocked to the online market to source essential supplies such as groceries.
Recently, BigBasket made headlines for its plan to raise around $150-200 million. Online retailer Paytm Mall, too, has reportedly initiated talks with e-grocery startup Grofers for a potential investment.