The move is said to be part of business restructuring plans the firm initiated after discovering financial irregularities in its operations in the country.

The cost of those cooked books is about US$ 162 million.

But is this an extraordinary situation or does it signal an end to India’s retail boom?

Ankur Bisen, associate director, Retail & Consumer Products, Technopak Advisors Pvt Ltd, said: “That’ll be stretching the argument too far. I think the Adidas/Reebok story in India has definitely got two sides. One is the external environment and the second part is the internal mechanisms or the way they managed the business.”

Retail, which is a relatively young industry in India, is only just starting to take off – and analysts said the sector needs help to grow.

Bisen said: “So the steps that need to be taken are looking at the intra-state goods and the taxation involved around it, sourcing efficiencies…”

Analysts also said that while demand-side reforms have been legislated and enacted, that is no longer enough.

They said it is now time for the government to do more for the supply side of the equation.

Bisen said: “(The) government definitely needs to take some steps… in terms of how it looks at retail, whether it looks at retail as a shop or whether it looks at retail as an industry sector.

“But having said that, we cannot put the onus on the government and say, that because government has not done (anything), as a result retail is not growing. Another side of the argument may be that retailers can look at the India opportunity very differently. There are still emerging economic hotspots where retail evolution has to percolate which has not happened.”

The issue of foreign direct investment in multi-brand retailing continues to be a prickly one.

While the industry appears to be ready for change, the political landscape is still uncertain.

Adidas’ move will not spell doom for Indian retail. The sector as a whole is projected to be worth US$ 725 billion by 2017. But that cannot happen with government help alone. For the industry to grow successfully, it will need to tap into rural areas, semi-urban areas, and tier-two cities.

- CNA/cc
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