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Tesco Aims To Build On Tata Tie-Up For India Retail

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Retail giant Tesco Plc plans to build on its existing tie-up with Tata Group to expand in the country if foreign operators are allowed to invest in multi-brand retail, an executive director of the UK retailer said on Monday.

India currently allows 51 per cent foreign investment in single-brand retailers and 100 percent for wholesale operations. Global players such as Wal-Mart Stores Inc and Carrefour have long sought greater access to the country's small but fast-growing organised retail sector.

New Delhi is considering raising the foreign ownership cap in multi-brand retail to 51 percent, a move aimed at unclogging supply bottlenecks and tackling high inflation. The policy has been in the works for years but remains held up by political opposition.

Tesco signed a franchise agreement in 2008 with Trent Ltd, part of the salt-to-steel Tata conglomerate, under which the Indian firm's Star Bazaar shops use Tesco's supply chains and infrastructure.

"We have a strong relationship with Trent, the retail arm of Tata, which is allowing us to provide services to them," Lucy Neville-Rolfe, executive director, corporate and legal affairs, told Reuters in an interview on the sidelines of a World Economic Forum event in Mumbai.

"If and when liberalisation comes, we can then use that to build up a business," she said.

Domestic chain operators such as Trent, Pantaloon and the RPG Group are hopeful that the opening of the sector to foreign players will spark joint ventures and investment from global operators that will be required to team up with local players.

Small shop owners account for more than 90 percent of India's $450 billion retail sector. Backed by opposition parties, they have opposed the entry of foreign players, fearing that they will be put out of business.

"It felt as if there was a little flurry," said Neville-Rolfe, about progress in opening up the sector. "But it seems as if the flurry has slowed a little bit."

Tesco signed an agreement with Trent in 2008 to open 50 Star Bazaar hypermarkets by 2013, of which 13 are now operational.

For its own stores, Tesco sources around 270 million pounds ($434 million) worth of products such as cotton, tea and grapes from India each year, and has an office in Bangalore where almost 6,000 employees work on research and development and internal services for the firm.

"You need to look at this market ten years hence," said Neville-Rolfe. "It's a market of interest for us even if the investment climate doesn't open up."

Eight years after entering China, Tesco has over 100 supermarkets in the country, contributing over 1 billion pounds ($1.61 billion) in annual revenue.

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