Tesco plans cautious India entry after arm-twisting by politicians

Thu Dec 19, 2013 8:26am EST
 
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By Nandita Bose

MUMBAI (Reuters) - It took months of arm-twisting and assurances from New Delhi to persuade British retailer Tesco Plc (TSCO.L: Quote) to take the plunge and become the first foreign player to set up a chain of supermarkets in India.

Earlier this year, world No.1, Wal-Mart Stores Inc (WMT.N: Quote), walked away from India and few expected any of its rivals to step in before elections due by next May, which could bring to power a government that reverses the opening up of a $500 billion market long dominated by millions of mom-and-pop shops.

But on Tuesday, Tesco announced that it had applied to buy a 50 percent stake in Tata Group's Trent Hypermarket Ltd TREN.NS to open stores in the western state of Maharashtra and neighboring Karnataka,

The decision marked a victory for the ruling Congress party in securing its first foreign investment victory after staking its political survival on reforming the supermarket sector.

"We were under phenomenal pressure from the Indian government to apply and frankly phenomenal pressure is an understatement," said a senior Tesco official, who spoke on condition of anonymity. "The pressure was intense on a government-to-government level."

A Tesco spokesperson did not comment on the reasons behind the company's decision to enter India now.

"We've always said we'd like to get more involved in this exciting market and having learnt a great deal through our agreement with Tata, we have taken the decision to make an application to develop a multi-brand retail business in India."

Tesco is in the middle of a big investment drive to reinvigorate its sales in the UK and despite closing loss-making businesses in Japan and the United States, its move to enter India shows the retailer's continued ambitions to expand abroad.   Continued...

 
Trolleys are stacked outside a Tesco store in Hammersmith, west London October 3, 2012. REUTERS/Paul Hackett