Bharti in Rs 6000 cr retail splash

Bharti in Rs 6000 cr retail splash

Author | Source: Business Standard | Thursday, Mar 16,2006 7:27 AM

Bharti in Rs 6000 cr retail splash

Tesco may pick 49% in venture; Sunil Mittal firm says talks at preliminary stage.

The Bharti group is all set to make a big splash in the booming retail sector. The Sunil Mittal-controlled group, which runs the country’s largest private telecom firm Bharti Tele-Ventures, is believed to have initiated talks for a joint venture with Tesco, the world’s largest grocery retailer and a Fortune 500 company, to enter the food retail segment.

A source close to the development said Bharti had set up an internal team to finalise the rollout, which would see an initial investment of around Rs 6,000 crore. It added Bharti would enter food retail with the conventional model of setting up a chain of supermarkets, hypermarkets and convenience stores.

A Bharti spokesperson said, “The company has interest in the horticulture arena and is exploring opportunity in food retail. For now, we are evaluating various options.”

He also added since the initiatives were at an early stage it would be premature to comment now.

In an e-mail to Business Standard, a spokesperson for Tesco said: “The company doesn’t comment on speculation.”

With the Centre permitting foreign direct investment in retail, the £34 billion Tesco might pick up as much as 49 per cent in the joint venture. With over 2,000 stores worldwide, the principal activity of Tesco is food retailing.

Industry sources said the proposed move gelled well with Bharti’s planned entry into the agri-commodities and insurance businesses. It had announced plans to set up a life insurance venture in association with AXA Asia Pacific Holdings in August last year.

The Bharti AXA Life Insurance, a 74:26 joint venture between the Indian and the French groups, committed investment of Rs 500 crore over three years.

Prior to that, it had tied up with the EL Rothschild group-owned ELRO Holdings India to export fresh agriculture products to Europe and the US. It had made abortive attempts to participate in the modernisation of the Delhi and Mumbai airports.

If the move fructifies, Bharti would be the latest to enter the Rs 35,000 crore domestic retail market after the Mukesh Ambani-controlled Reliance Industries’ announcement to foray into the sector. Industry watchers found a similarity between the plans of Reliance and Bharti.

“Both have the experience of handling consumer-centric businesses such as telecom and both have huge cash flows, which could be ploughed into the retail space. Also, they will run agri ventures simultaneously,” said a Mumbai-based retail analyst.

The scope of organised retail is huge as it commands a meagre 3.5 per cent share of the total retail market. The sector is expected to grow at 26 per cent CAGR over the next few years. It is the second largest employer in the country after agriculture. Food and grocery is the least penetrated so far with maximum opportunity for growth.

Tesco had told Business Standard a couple of months ago that it had sourced goods worth pound 65 million from India last year and planned to enhance it to pound 95 million this year. Tesco’s sourcing from India was focused on apparel with 90 per cent of total sourcing.

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