Tesco to invest Rs.4.8 bn in India, ties up with Tata (Lead)

August 12th, 2008 - 5:33 pm ICT by IANS  

London/Mumbai, Aug 12 (IANS) Britain’s largest retailer Tesco Plc Tuesday announced a 60 million pounds (Rs.4.8 billion) initial investment to develop a wholesale cash-and-carry business in India that will source directly from farmers and supply to a range of outlets from mom-and-pop stores to hypermarkets. Alongside, Tesco also announced a tie-up with Trent Ltd, the retail arm of the Tata group, to help develop the Indian company’s Star Bazaar hypermarkets.

The new wholesale outlets, wholly owned by Tesco, will offer a comprehensive range of fresh food, grocery and non-food products to small retailers, restaurants, owner-run general stores and other business owners.

“The business will provide farmers and other suppliers with a highly efficient route to market. Based initially in Mumbai, the business will benefit from over a decade of experience of setting up local businesses in international markets,” Tesco said.

The tie-up with the Tata Group will allow Trent to source quality Tesco products for its Star Bazaar hypermarkets and to benefit from the British retailer’s technical know-how and experience.

Tesco is expected to play a major role in Trent’s plans to increase the number of Star Bazaar stores from the current four to 50 over the next five years.

India presently permits up to 51 percent foreign investment in single-brand retail trade business but disallows such equity in multi-brand stores in a bid to protect domestic stores, predominantly run as neighbourhood mom-and-pop shops. As a result, big global names in the business such as Wal Mart, Carrefour and Costco are waiting for the Indian government to relax the norms.

The policy, however, permits 100 percent foreign equity in cash and carry or the wholesale business, as also in the area of extending technical know how, supply chain management and general support services to Indian retail companies.

Some large domestic players in the business with major plans include Reliance Industries, the Bharti group, Plaza, DLF, Spencers and the Aditya Birla Group. Among them, Bharti group has a tie-up with Wal Mart, while Carrefour has set up two companies in India - one for cash-and-carry trade and the other to appoint franchisees for multi-brand retailing.

The past couple of years have seen keen interest from global players and domestic companies alike to enter the retail trade business in India that is estimated at over $340 billion at present and projected to touch $520 billion by 2010.

Tesco group chief executive Sir Terry Leahy said the development complemented its entry into China and the US, giving it access to one of the most important economies in the world.

“Our wholesale cash-and-carry format will bring improved value, range and service to thousands of Indian businesses,” he said.

“We are delighted to be working with Tata, one of India’s largest and most respected business groups. Our agreement will enable us to share our international retail expertise, supporting Trent in the development of their Star Bazaar hypermarket business and benefiting Indian consumers.”

Tesco already sources over 170 million pounds worth of Indian products each year, with sourcing offices in Delhi, Bangalore and Tirupur.

It also employs nearly 3,000 Indian staff at its Hindustan Service centre in Bangalore that provides information technology, financial and business services to the entire Tesco Group.

Trent managing director Noel N. Tata said: “We are extremely excited about our association with Tesco. Our ability to access Tesco’s retail knowledge and expertise will play an important role in our endeavour to offer a unique shopping experience to customers across the country.

“Their wholesale cash-and-carry business will provide us with the opportunity to tap into a world class supply chain thereby delivering the best of products and services to our customers.”

The Tesco Group had sales of $99.5 billion in the year ending February 2008. It has 3,729 stores, employing over 440,000 people in 13 countries.

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