Star fashion brands in an ecommerce knot

NEW DELHI: The latest amendments to the FDI policy on ecommerce could inflict collateral damage on Bollywood stars, including Saif Ali Khan, Hrithik Roshan, Deepika Padukone and Alia Bhatt, who have launched their own fashion brands.

Flipkart-owned fashion portal Myntra — or its subsidiary Jabong in the case of Bhatt — holds a stake in these celebrities’ brands, people aware of the matter told ET. The brands are mostly sold on Myntra, Jabong and Flipkart, which has been acquired by Walmart. That would run afoul of new FDI rules, which are scheduled to come into effect on February 1. 
 
“An entity having equity participation by ecommerce marketplace entity or its group companies, or having control on its inventory by ecommerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” says the policy announced in December. This raises uncertainty over whether brands like House of Pataudi (Khan), HRX (Roshan), All About You (Padukone) and Alia Bhatt For Jabong will be able to continue selling on the FDI-backed platforms.

Brands will have to stop selling from Feb 1Myntra did not respond to queries and neither did the actors’ representatives. Analysts said the celebrity brands will have to stop selling on Myntra and Jabong from February 1unless online store operators sell their stakes in those labels.

“An ecommerce platform that has foreign capital, it is absolutely clear that you cannot hold inventory and have stake in an inventory model,” said Devangshu Dutta, chief executive of retail consultant Third Eyesight. Flipkart, Myntra’s parent and India’s largest ecommerce enterprise, was acquired by Walmart for $16 billion last year. “It seems difficult (for the celebrity brands) with foreign capital and with the new clauses,” Dutta said. “They will have to spin it into a different company or something like that.”

Most other celebrity brands such as Salman Khan’s Being Human, Virat Kohli’s One8 and Sonam Kapoor’s Rheson will not be impacted by the new rules because they don’t have equity relationships with the ecommerce marketplaces.

A person familiar with the development said Jabong had “discontinued” selling Bhatt’s brand a while ago, but a sheath outfit bearing the label was still available on Jabong for Rs 2,999 on Wednesday.

According to company insiders, Myntra has controlling equity in HRX, coowns House of Pataudi with Khan and holds a stake in Padukone’s label. Similarly, Jabong owns a stake in Bhatt’s brand, sources said.

ET had reported in August 2016 that Myntra had acquired a controlling 51% stake for an undisclosed amount in HRX from co-owners Roshan and Exceed Entertainment, with the original promoters holding the rest.

House of Pataudi — co-owned by Myntra, Exceed Entertainment and Khan — was launched three months ago to sell ethnic wear for men and women.