New Delhi | Mumbai | Bangalore IF YOU ARE IN THE MARKET – YOU NEED TO GROW: RETAIL SUMMIT, FRANCHISE INDIA 2012 By Aparna Mittal Partner Corporate / M&A / Franchise and Retail © Luthra & Luthra Law Offices 1

RETAIL SECTOR IN INDIA: A PHENOMENAL GROWTH STORY  Indian retail market estimated to be USD 450 billion  One of the top five retail markets in the world.  Accounts for 14-15% of India’s total GDP.  Organized retail sector growing at 45-50% growth rate per annum. 2 © Luthra & Luthra Law Offices

ESTABLISHING PRESENCE IN INDIA  Good understanding of the sector, unique consumer demand and sentiment and regulatory framework  Commercial Due Diligence on the Market.  Identification of partner : Goals, Synergies, Ethics and Long term Strategy.  Pure Franchise : No equity or financial investment from franchisor.  Joint Venture (franchise / brand license and financial investment- equity vs debt ). 3 © Luthra & Luthra Law Offices

ESTABLISHING PRESENCE IN INDIA  Foreign Direct Investment Policy Automatic Route vs Approval Route. Sectoral Caps – Depending on industrial sector (hotel, food, retail etc). Upto 100% FDI, under the automatic route, in wholesale trading (with conditions). Upto 100% FDI, under the approval route, in single brand retailing (with conditions). Upto 100% FDI, under the approval route, in multi brand retailing (with conditions). 4

GROWTH & EXPANSION  Defining scope of the alliance. Allocation of Responsibilities and Degree of Control Investment Outlay and Funding Commitments Thresholds for Performance and Creative Solutions  Non compete : Products, Activities, Duration, Geographical Extent.  Right of First Refusal for new business / products/ activities.  Funding : Access to domestic market (interest rate on rupee loans approximately %). External Commercial Borrowings not permitted (eligibility issues and end use restrictions). Financial Investment by Franchisor (including staggered buy outs). Third Party / Private Equity Funding : Viability and Terms. 5 © Luthra & Luthra Law Offices

INCREASING EFFICIENCIES  Location, Warehousing and Inventory Management.  Preferred Suppliers.  Mitigate Indirect Tax Efficiencies.  Common / Shared Facility Services.  Discount Policy (Global policy vs Indian market).  Anti Piracy and Anti Counterfeiting Investigations. 6 © Luthra & Luthra Law Offices

RELEVANT INTELLECTUAL PROPERTY LEGISLATION  Trademark Act, 1999 Entities (including foreign entities) may directly register their trademarks in India o Grounds for refusing registration: Mark lacks distinctive character Likely to deceive the public Identical or similar to an earlier mark and relates to identical or similar goods, and is likely to cause confusion etc. Duration of registration= 10 years + renewals (for 10 years) from time to time Remedies for infringement of registered trademark- Suit for infringement Requirement to register assignment of trademarks Registered user vs. Permitted user o Requirement to register registered user, while permitted user needs to have only written agreement with owner of trademark o Registered user can sue in his own name in case of infringement 7 © Luthra & Luthra Law Offices

Thank You! 8 Aparna Mittal Partner © Luthra & Luthra Law Offices