British retailer Tesco seeks India foray in JV with Tatas

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First foreign chain to enter multi-brand retail after easing of FDI

British retailer Tesco seeks India foray in JV with Tatas
The Tata group has announced that British retailer Tesco is seeking approval of the foreign investment promotion board (FIPB) to float a 50:50 joint venture with its retail arm, Trent Hypermarket. Tesco plans to invest Rs 682 crore in the venture.

This is the first application in the multi-brand retail segment since 51 per cent FDI was allowed in such businesses in September last year. Tesco’s proposal says the joint venture will operate in India a chain of stores under different banners, including Star Bazaar, Star Daily and Star Market with a tag line stating ‘A Tata and Tesco enterprise.’

The partnership will operate and build on Trent’s existing portfolio of Star Bazaar stores in Karnataka and Maharashtra.

Noel Tata, vice-chairman of Trent, said in a press statement, “We believe that our understanding of the Indian market coupled with Tesco’s unparalleled global retail expertise will allow us to leverage the tremendous potential of the market to the benefit of all stakeholders.”

Trent Hypermarket is a unit of Trent that runs the Landmark and Westside chains, among others. Trent Hypermarket runs 16 stores in south and west India.

According to Abneesh Roy, associate director of Edelweiss Capital, the FDI plan should not be confined to just Karnataka and Maharashtra. “It could perhaps become more challenging to expand the Tata-Tesco stores across India,” he said.

Tesco intends to open three to five stores every year and sell 14 categories of products, according to its application. The company seeks to sell cereals, tea, spices, vegetables, sweets, textiles, jewellery, among others.

Harminder Sahni, MD of Wazir Advisors, said, “There is enough market opportunity for Tesco to come and grow. Tata is a great partner to work with.”

Anand Sharma, commerce and industry minister, said in a statement, “We hope this will mark a new beginning in transforming India’s retail industry. I am sure that other global leaders will also look at investing in India. The application of Tesco follows the decision of the government to allow FDI in multi-brand retail. The key objective of the policy is to address the issue of post-harvest management and contain the losses of agricultural produce, particularly perishable produce.”

“It also seeks to secure remunerative prices for farmers and generate employment and integrate our small and medium enterprises into global value chains. The policy, which has a distinct Indian imprint, seeks to develop integrated infrastructure at the back-end, including cold chains processing units. The consumers of India will also benefit by getting quality produce at affordable prices,” Sharma added.

With elections four or five months away, there could be some policy changes deciding the fate of foreign retailers in India. Some retailers may not get sufficient leeway to spread their wings across India; some others may have to shut shop.

Both BJP and APP oppose FDI in retail. Analysts say a stable Narendra Modi-led BJP government could boost investor sentiment.

Walmart ended its joint venture with Bharti Enterprises, citing “critical stumbling block” to open its trademark consumer stores.

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