News: Bharti near deal with foreign retail partner
(RTR 20/11/2006) Mumbai - Bharti Enterprises Ltd is nearing a deal to partner with one of the world's biggest retailers, with speculation rife that Wal-Mart Stores Inc may pip UK's Tesco Plc to the post. Some local media reports indicated a deal had been finalised with Wal-Mart, but a spokesman for the Bharti group, which controls India's biggest mobile services provider, Bharti Airtel Ltd, told the media the company had not signed off yet.
"We continue to be in talks with all the global majors," the spokesman said, declining to specify when a deal may be finalised. Bharti Chairman Sunil Mittal told the media in October a deal was likely by the end of November.
"Bharti can't lose with either: both have the size and the branding and a proven track-record in non-home markets," said a retail consultant who declined to be named.
"Ultimately, it would come down to who can deliver the better value and a cultural fit between the two companies," he said.
India's financial newspaper said at the weekend Bharti and Wal-Mart had finalised a master franchise agreement that would include hypermarkets, supermarkets and grocery stores.
The two would initially invest $100 million, going up to $1.46 billion, the paper said, quoting industry sources.
The Indian retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors.
Organised, or branded, retail makes up only 3 percent of the Indian market, compared to China's 20 percent and Thailand's 40 percent.
TILLS RINGING
But that share is set to rise to 15-18 percent by 2011/12, with the entry of large Indian firms including Bharti, Reliance Industries , the Tatas and the Aditya Birla Group.
Reliance Industries, the top petrochemical company, recently opened its first grocery stores and is investing $5.6 billion in formats ranging from convenience stores to hypermarkets. It expects revenue of $22 billion from retail operations by 2010/11.
Cigarette maker ITC Ltd has also opened its first grocery stores and plans to add outlets quickly.
Foreign retailers are keen to enter the rapidly growing market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, like Metro AG and Shoprite have chosen.
Single-brand retailers are allowed to own a majority stake in a joint venture with a local partner, and the expectation is that India would ease rules on foreign investment in the back-end.
Bharti has a joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to overseas retailers. Wal-Mart has a liaison office in India and expects to step up sourcing of items such as apparel, textiles and shoes from India, which totalled more than $1.6 billion this year. Tesco also sources food and non-food items from India.
"We continue to be in talks with all the global majors," the spokesman said, declining to specify when a deal may be finalised. Bharti Chairman Sunil Mittal told the media in October a deal was likely by the end of November.
"Bharti can't lose with either: both have the size and the branding and a proven track-record in non-home markets," said a retail consultant who declined to be named.
"Ultimately, it would come down to who can deliver the better value and a cultural fit between the two companies," he said.
India's financial newspaper said at the weekend Bharti and Wal-Mart had finalised a master franchise agreement that would include hypermarkets, supermarkets and grocery stores.
The two would initially invest $100 million, going up to $1.46 billion, the paper said, quoting industry sources.
The Indian retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors.
Organised, or branded, retail makes up only 3 percent of the Indian market, compared to China's 20 percent and Thailand's 40 percent.
TILLS RINGING
But that share is set to rise to 15-18 percent by 2011/12, with the entry of large Indian firms including Bharti, Reliance Industries , the Tatas and the Aditya Birla Group.
Reliance Industries, the top petrochemical company, recently opened its first grocery stores and is investing $5.6 billion in formats ranging from convenience stores to hypermarkets. It expects revenue of $22 billion from retail operations by 2010/11.
Cigarette maker ITC Ltd has also opened its first grocery stores and plans to add outlets quickly.
Foreign retailers are keen to enter the rapidly growing market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, like Metro AG and Shoprite have chosen.
Single-brand retailers are allowed to own a majority stake in a joint venture with a local partner, and the expectation is that India would ease rules on foreign investment in the back-end.
Bharti has a joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to overseas retailers. Wal-Mart has a liaison office in India and expects to step up sourcing of items such as apparel, textiles and shoes from India, which totalled more than $1.6 billion this year. Tesco also sources food and non-food items from India.
posted by InCar Group Press Room at 18:07
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