Bloomberg News

India May Ease Rules Next Week to Allow Wal-Mart, Tesco Entry

November 18, 2011

Nov. 17 (Bloomberg) -- India may consider a proposal next week to allow Wal-Mart Stores Inc., Tesco Plc and Carrefour SA gain access to the $396-billion retail market in Asia’s second- fastest growing economy.

The cabinet will discuss a plan to permit overseas companies to own as much as 51 percent of stores that sell more than one brand, said four government officials with direct knowledge of the matter. Full foreign ownership of companies that sell a single brand will also be considered, one of the people said. All four declined to be identified, citing government policy.

India bars overseas companies from owning retail outlets that sell more than one brand and allows 51 percent holding in single-brand retail. Wal-Mart and Carrefour, who operate wholesale stores in the country, are among companies vying for a share of a market that Business Monitor International estimates will double to $785 billion by 2015.

“India is a huge market that will attract the interest of foreign investors,” said Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities. “Food prices will be under check when organized retail comes in because it is accompanied with infrastructure development at the back end.”

Pantaloon Retail Ltd., India’s largest retailer, surged 7.4 percent in Mumbai today, while Trent Ltd., Tesco’s local partner, rose 0.2 percent. The benchmark Sensitive Index declined 1.9 percent.

Arti Singh, a spokeswoman for Wal-Mart’s India operations, declined to comment on speculation. Mohan Shukla, director of corporate affairs for Carrefour India, gave no comment.

Local Purchases

The approval may include conditions such as purchasing at least 30 percent of goods locally, two of the people said. The decision may come as early as Monday, they said. Foreign retailers will need to invest at least $100 million in the country, with half that amount going to develop the supply chain, one of the people said.

Bharti Walmart Pvt., the Bentonville, Arkansas-based company’s joint venture with Bharti Enterprises Pvt., operates fourteen wholesale stores in India. Carrefour, based in Boulogne-Billancourt, France, opened its first such store in December.

Tesco, Britain’s largest supermarket chain, will set up its India operations once the government allows foreign ownership, Lucy Neville-Rolfe, a director at the company, said on Nov. 14. The Cheshunt, U.K.-based retailer has a franchise agreement with Trent, a Tata Group company.

“We have a long-term plan given that India is going to have about 25 percent of the world’s population,” Neville- Rolfe, said in the interview in Mumbai. “So it is good for us to invest more.”

Fighting Inflation

Raj Jain, who heads Wal-Mart in India, said last year foreign retailers can help slow inflation by helping improve the quality of the local supply chain. About 40 percent of India’s fruit and vegetables rot before they can be sold because of a lack of cold-storage facilities and poor transport infrastructure, according to government figures.

A panel on inflation in a report recommended easing rules for multibrand retail to help moderate food prices, Kaushik Basu, chief economic adviser in the finance ministry and a member of the group, said in May.

Food inflation has averaged 10.3 percent this year in the world’s second-most populous nation.

--With assistance from Malavika Sharma in New Delhi. Editors: Subramaniam Sharma, Abhay Singh

To contact the reporters on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net

To contact the editors responsible for this story: Stephanie Phang at sphang@bloomberg.net; Sam Nagarajan at samnagarajan@bloomberg.net


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