Despite Uncertainty Over FDI in Multi-Brand Retail, Tesco Upbeat on Trent Tie-Up for Growth in India

NEW DELHI: British retail major Tesco remains optimistic about its partnership with Tata group firm Trent to capitalize on growth opportunities in India despite uncertainty over FDI in multi-brand retail as the new BJP government, led by Narendra Modi, is set to take charge. In his annual address to shareholders, Tesco Chief Executive Philip Clarke said the company has entered into an agreement with Trent , part of the Tata Group, to form a 50:50 joint venture with Trent Hypermarket, enhancing presence in the Indian market.

"We firmly believe that our partnerships in both China and India will allow us to capitalise on these enormously exciting markets in a way which is disciplined in our use of capital and focused on profitable growth," he added.

The British retail major Tesco and Trent Ltd had finalized their JV for multi-brand retail in March this year thus becoming the first foreign retailer to plan a foray into the segment after the outgoing UPA government had allowed up to 51 percent FDI.

However, BJP had announced in its election manifesto that it would oppose FDI in the multi-brand retail segment and all eyes are on how the new government under Modi will address the issue. Tesco Chairman Richard Broadbent Chairman said: "Many of our choices this year, to enter partnerships in China and India or to invest modestly in an internet start-up in South East Asia, reflect this philosophy of establishing a position of opportunity and testing returns against our criteria as a basis for building long-term, value-enhancing positions."

The company said China, India and Turkey are the markets where it must refocus on a more profitable approach to growth. Tesco Chairman added the company continues to see "opportunity to create value internationally by leveraging our skills and scale in relatively rapidly growing economies with less developed modern retail sectors where the rate of economic growth coupled with switching to modern retail outlets can generate attractive returns."

Tesco had announced forming of an equal joint venture with Trent by picking up 50 percent stake in Trent Hypermarket Ltd (THL) for about 85 million pounds. THL operates the Star Bazaar retail business in India. While announcing the new joint venture, Tesco had said: "On completion of the transaction THL will operate 12 stores retailing a range of merchandise, including food and grocery, personal and home-care products, home and kitchen, fashion and accessories."

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