After having failed to clinch a deal with Bharti Enterprises, British retailer Tesco is on the verge of forging a partnership with the Tatas. According to sources, Tesco and Tatas have reached "a crucial stage in the negotiations, which have advanced considerably over the recent past".
Tesco is keen to enter the $300 billion Indian retail market. After the Bharti deal fell through, the company started looking for some other industrial groups, including the Tatas. The Tata spokesperson declined to comment.
Sources said for the Tesco and Tata tie-up to fructify, the deal would have to be structured in a manner that does not cause a conflict of interest between Woolworth and Tatas.
The latter is already having a partnership with the Australian company, under which they have started a consumer electronics retail store chain - Croma. Woolworth will source and provide technical support to the venture.
Interestingly, while Tesco is the largest food retailer in the United Kingdom, Woolworth is the number one in this category in Australia. Moreover, Tesco, which was originally a food retailer, has diversified into consumer electronics and clothing.
As Tesco and Woolworth both have interests in food retail and consumer electronics, it becomes even more important for any conflict-of-interest issues to be dealt upfront.
Tesco CEO Sir Terry Leahy said, "India has got to be on everybody's list, and it is on ours too. We are researching the market. We already have important facilities in India. We write a lot of our software there, develop a lot of our business processes there, and we have been buying offices too. But no retail of course."
Currently, foreign direct investment guidelines do not permit any international retailer to set up multi-brand stores in India. However, 51 per cent FDI in single-brand retail and 100 per cent FDI in wholesale or cash-and-carry formats are permitted.
In November 2006, Wal-Mart, the world's largest retailer, signed a memorandum of understanding with Bharti Enterprises to provide it technology support in the areas of logistics, supply chain and back-end technology.
