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Foreign retailers' woes continue, Carrefour-Bharti deal in limbo

Saturday, 3 May 2014 - 8:55am IST | Place: Mumbai | Agency: dna

The woes of foreign retailers on Indian soil have continued unabated. After Walmart, the French retailer Carrefour's plans to ink a deal with an Indian partner for retail operations aren't heading anywhere. Differences over valuation with Indian businessman Sunil Mittal-promoted Bharti Enterprises and certain mandatory business terms seem to have put a spoke in the wheel.

Global retailers looking to establish presence in the over $518 billion retail market in India have been having a tough time making it a viable business proposition. Lack of clarity from the Indian regulators on foreign direct investment (FDI) in multi-brand retail have only made it difficult for global giants like Wal-Mart, Carrefour and Tesco among others to make concrete plans for their India operations.

Earlier in March, UK retail giant Tesco became the first supermarket chain to make India foray after it sealed a joint venture with Tata Group's retail venture Trent Ltd that would have seen an investment of $140 million. However, in April Bharatiya Janta Party (BJP) came out with its 42-page manifesto that opposed foreign direct investment (FDI) in multi-brand retail sector.

A sword now hangs on the Tesco-Trent joint venture if at all BJP comes in to power.

Last year the Bentonville, Arkansas-based World's largest retailer Wal-Mart Stores Inc called-off its joint-venture with Bharti Enterprises thus deciding to go solo with cash and carry operations in India.

In the last few years, a lot has been spoken FDI and the need to have a foreign partner to make retail a profitable business operation in India. However, the recent developments with few home-grown companies have shown retail can be both scalable and profitable. For instance, Reliance Retail recently turned around operations booking profits and has demonstrated the success of modern retail in India despite challenging business environment and economic slowdown

Arvind Singhal, chairman, Technopak, said, while foreign retailers have been finding it tough in India, few home-grown companies like Reliance Retail and D-Mart have demonstrated that retail is not only scalable but also profitable. "D-Mart is a profitable business operation with over Rs 5,000 crore turnover. Both are great examples of capabilities of Indian companies to run a profitable retail operations on their own," said Singhal.

While FDI in retail is being pushed for, every now and then, retail industry experts feel ground reality is completely different and that other retail companies are having a second thought on whether they need a foreign partner at all. The way Indian retail has shaped up in the last few years, has brought power and position in the hands of the home-grown companies who are now in a position to dictate terms with foreign retailers.

"Success of some of the companies have certainly brought that confidence in the retail companies who now want to take a call if they really want a foreign player on board and with terms and conditions that are favourable to them," said another retail industry expert.




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