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Ditched Tesco may tango with Tatas

After losing the race to be Bharti’s ally in India to Wal-Mart, Tesco, the UK-based supermarket chain, is now betting on the Tatas.

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Talks between the two groups began before Bharti deal was announced

MUMBAI: After losing the race to be Bharti’s ally in India to Wal-Mart, Tesco, the UK-based supermarket chain, is now betting on the Tatas.

The company is believed to be in talks with the venerated group and it is likely that the two may join hands to set up a chain of supermarkets in India.

Supermarkets are the large-format largely food and grocery stores, while hypermarkets are large-format stores with a departmental store as well as food and grocery elements inside. Food and grocery comprises roughly 20% of the whole retail business in value terms.

The Tata group is already present in country’s $250 billion retail sector through Trent Ltd, its Rs 346 crore arm that runs the Westside apparel retail chain and hypermarket Star India Bazar.

Besides, last month, the group entered into a tie-up with Australian retailer Woolworths for the consumer durables retail chain Croma.

“Tesco’s expertise is in supermarkets. And so far Tatas have not got into this format. So both the companies are talking to finalise a joint venture to start a chain of supermarkets in the country,” said a source aware of the development. Tesco is the fourth-largest retailer globally with an annual turnover of $76.87 billion.

It was in talks with Bharti Enterprises for roughly a year. But Wal-Mart managed to clinch the deal at the last minute “with a better offer”.

Tesco is said to have started talks with the Tata group well before the Bharti-Wal-Mart deal got formally announced, it is learnt. The Tata group was not available for comment.

With competition intensifying back home, crimping margins, Tesco wants to hedge by playing in India. It was looking at a $2 billion investment plan with Bharti. Sources said it is unlikely to bring anything less. Current government policy restricts foreign retail players from floating fully owned retail businesses in India.

But foreign direct investment is allowed in single-brand retail stores, franchise set-ups and wholesale operations. International retailers such as Woolworths and Wal-Mart have exploited these options to get into Indian retail. Tesco would also look at a similar kind of arrangement, it is learnt.

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