News: Tesco fails to clinch retail deal to enter India

(RTR 25/11/2006) London - Britain's Tesco Plc has failed to clinch a deal with Indian conglomerate Bharti Enterprises Ltd, clearing the way for the world's biggest retailer, Wal-Mart, to get access to the lucrative Indian retail market.

A Tesco spokesman said on Friday that Britain's biggest retailer had ended negotiations to form a widely-expected joint venture with Bharti, but said the company still planned to enter India's retail sector.

"We have decided not to progress talks with Bharti over a possible joint venture in India," the Tesco spokesman said, without giving further details.

"We remain excited by the opportunities available in India and continue actively to review how best we might enter the market. As this work progresses, we will be in a better position to give more detail."

Bharti Chairman Sunil Mittal told Reuters in an e-mail that a partnership would be finalised soon, but refused to say who it would be with. Mittal said last month negotiations were down to Wal-Mart and Tesco.

Wal-Mart Stores Inc. did not immediately respond to requests for comment.

Tesco, like Wal-Mart, is looking to expand to new markets to offset the possibility of future saturation at home and the end of talks with Bharti, which it was widely expected to win at the outset, is a setback.

Yet, analysts said there was a still time to enter India, while Tesco, which already operates in 12 countries, repeated it was on track to have 60 percent of its group space outside Britain by the end of year.

An industry source said Tesco had pulled out of the months- long talks, that originally included France's Carrefour as well as Wal-Mart, because Bharti's timing for store roll-outs did not coincide with its plans.

Indian newspapers last weekend reported that Bharti had decided Wal-Mart was a more suitable partner, but a spokesman for the Bharti group, which controls India's biggest mobile telephone services provider, Bharti Airtel Ltd., said at that time that no deal had been completed.

NEW MARKETS

Foreign retailers are keen to enter India's rapidly growing market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, such as Germany's Metro AG and South Africa's Shoprite Holdings have chosen.

The Indian retail industry is estimated at about $300 billion and is seen growing to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors, with the entry of large Indian companies, including Bharti, Reliance Industries Ltd and the Tata group.

Tesco's main focus now will be to open stores in the United States in 2007, a move that, if successful, is expected to be a big driver of its future growth.

The company has declined to comment on Polish newspaper reports this week that it is negotiating the buy 200 retail stores in Poland from Dutch retailer Ahold NV.

"In our view, the key to unlocking the true value of Tesco is the international business," HSBC analysts wrote last month.

India's Financial Express reported last weekend that Bharti and Wal-Mart had agreed on a master franchise deal 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.