The TATA group is in an advanced stage of discussion with British retail giant Tesco for a debut in the 'hypermarket' sector in India. A hypermarket is a huge retail facility, a superstore, which carries an enormous range of products under one roof.
The Tata-Tesco talks are for a strategic alliance, which will eventually be converted into a joint venture as and when the government allows foreign direct investment (FDI) in the retail sector, sources in the industry said.
This would be the third venture of the Tata Group into the retail segment. Trent Limited, headed by Noel Tata, is one of the oldest retail companies of the country, which runs an apparel retail chain under the brand name 'Westside'. Last October, Infiniti Retail, a 100 per cent subsidiary of Tata Sons, entered into a technical alliance with Australian retail chain Woolworths to start India’s first large-format specialist retail chain for consumer electronics and durables under the brand name Croma.
The sources said the Tata-Tesco partnership would be along the lines of the Infiniti-Woolworths alliance. Since the government has not allowed FDI in the retail segment, in the first stage it will be a technical alliance, which will eventually turn into a 74:26 joint venture where the Tatas will have the larger stake, the sources said.
The broad agreement is almost finalised and a formal announcement will be made shortly, the sources said. The alliance will focus on the hypermarket segment in all major cities in the initial stage. Although the financial details are not available, sources said since the hypermarkets would be started in all major cities the initial investment would be more than a billion dollars.
However, a Tata Group spokesman, while reverting a detailed questionnaire from HT, said the news of the proposed Tata-Tesco alliance was incorrect. He said he would not comment on market speculations.
Prior to the talks with the Tata Group, Tesco was in discussion with the Bharti Group, which eventually failed, as Tesco was not interested in making the required investment. Bharti has entered into a strategic alliance with the US retail giant Wal-Mart.