Tesco to enter Indian retail through JV with Tatas


December 17, 2013

Raghavendra Kamath, Business Standard

Mumbai, December 17, 2013

In a move that will pave its way to enter Indian retailing segment, UK-based retailer Tesco is picking up 50% stake in Trent Hypermarkets run by Tata-owned Trent.

Tesco will make an application to Foreign Investment Promotion Board, Trent said in a statement today. Tesco already has a franchise agreement with Trent to provide background support to Trent in terms of technical know-how, sourcing and so on. Trent Hypermarkets runs 16 Star Bazaar branded hypermarkets in the country.

Trent said the proposed venture will build on existing portfolio of Star Bazaar stores in Maharashtra and Karnataka.

"The application envisages a minimum foreign direct investment in line with the applicable multi brand retail trading policy," the statement said. According to reports, Tesco is expected to make an investment of $110 million in India.

Noel Tata, Vice Chairman of Trent, said: “The application is a positive step forward in the relationship between the Tata Group and Tesco. 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.”

Devangshu Dutta, chief executive, Third Eyesight, a retail consultant said: "When Tesco got into partnership with Tatas, the intent was to look at retail and not the back-end. Whenever Tesco expanded into new markets, they have done high level of localisation. In partnership with Tatas, they worked in the back-end, so its logical thing to take this partnership to a joint venture in retailing."

Dutta says many South Korean and japanese retailers are looking at Indian market seriously.

"Given the size and growth rate of India, any retailer who is looking to build a significant business in overseas markets, will look at India. Timing may not be appropriate for some of them, but they will definitely pursue their India plans", he said.

Tesco has a wholesaling business in the country and a global support centre based out of Bangalore.