shein: FDI panel nod not needed for Shein-Reliance licensing pact: Officials

Chinese fashion giant Shein’s licensing agreement with Reliance Retail Ventures Limited doesn’t require an approval from the FDI Proposal Review Committee, as there is no equity investment by Shein into the Indian company, officials said.

Under the agreement, Shein will license its technology and trademarks to be used by Reliance Retail and to also develop an indigenous e-commerce retail platform for Indian consumers that would sell Shein branded products.

“Ownership and control of the platform will always remain with RRVL’s subsidiary, a 100% Indian company,” said an official. The platform will be specifically for the Indian market and would sell made in India products.

However, an approval under Press Note 3 would be required if Shein plans to invest in India. There are three textile related proposals – including one under the Production Linked Incentive scheme and another, a Hong Kong based company – which have come from India’s land border sharing countries and would require the committee’s approval.

The committee is headed by the Union Home Secretary and was constituted for closer scrutiny of security clearances for FDI proposals from India’s land border sharing countries to prevent Chinese companies circumvent rules to acquire entities in India.

“Such a license agreement has been done for the first time…There is going to be no equity investment by Shein into the Indian company…An approval would be required under PN3 If Shein plans to invest in India,” said an official.

As per the official, any payment to Shein will only be made out of profits of the Indian company and that there is no fixed payment committed to Shein.Allaying security concerns, officials said that ownership and control of the platform will always remain with Reliance Retail’s subsidiary, a 100% Indian company.

The platform and servers will be hosted exclusively within India there would be no customer data transfer outside India, and Shein will not have any access to, or rights over, such data due to localization of infrastructure and platform data.

“The India app would be walled off from Shein’s global app. This could become a template. The servers will be in India. Foreign companies will have no access to Indian data. No provision of data transfer. There is a wall between the global app and the Indian app,” the official said.

At present, 93% of Shein’s sourcing is from China but the partnership with RRVL involves integrating 25,000 MSMEs.

“This will create potential export opportunity of an approximately Rs 50,000 crore from India, even if only 25% of the existing global demand of Shein is sourced from India,” the official said.