UK-based retail giant Tesco Plc is in discussions to pick a 50 per cent stake in Tata Group’s hypermarket retail firm Trent Hypermarket Ltd (THL), which operates under the Star Bazaar brand and is engaged in multi brand retail trading. The financial terms of the deal stands undisclosed.
Update: Tesco plans to invest $110 million, according to its proposal to FIPB.
This would be the first such deal where a foreign retailer picks stake in an existing multi-brand retail chain in India after the government liberalised norms in the sector. The government allowed up to 51 per cent foreign direct investment (FDI) in multi-brand retailing in September last year.
Tesco has applied to the Foreign Investment Promotion Board (FIPB), the nodal authority for clearing foreign investments in the country, for the investment, as per a disclosure by Tata Group’s public listed retail firm Trent Ltd. THL is currently a wholly owned arm of Trent.
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.”
THL currently operates 16 stores across the southern and western regions of India. The proposed partnership will operate and build on the 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.
Established in 1998 as part of the Tata Group, Trent presently operates Westside, a fast growing chain of retail stores. The company has 74 Westside departmental stores.
Trent ventured into the hypermarket business in 2004 with Star Bazaar. This store offers customers an array of products that include staple foods, beverages, health and beauty products, vegetables, fruits, dairy products, consumer electronics and household items. Star Bazaar also includes a large range of fashionable in-house garments for men, women and children. Trent also owns majority stake in Landmark, a books and music retail chain.
For Tesco, this means an extension of existing relation with Tatas in the retail sector. It is already a wholesale supplier of merchandise to Star Bazaar.
This relationship is similar to Walmart’s past association with Bharti Group. Walmart recently decided to part ways with Bharti by acquiring its stake in the wholesale cash and carry joint venture which in turn was a supplier to Bharti Group owned retail chain Easyday.
(Edited by Joby Puthuparampil Johnson)