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Tesco bets on India to grow

Growth focus

April 16: After exiting the US because of poor sales, Britain’s supermarket giant Tesco is pinning its hopes on India even as the BJP, tipped to form the next government, has slammed the doors on foreign direct investment in multi-brand retail. The ruling Congress party, however, has made a strong pitch for FDI in multi-brand retail.

Tesco is not the only foreign retailer to be adventurous: earlier this month, US giant Walmart said it planned to open 50 more wholesale outlets in India after calling off its joint venture with the Bharti group last year.

In March this year, Tesco had announced an equal joint venture with the Tata group’s Trent, picking up 50 per cent in Trent Hypermarket Ltd for about 85 million.

“We have completed our exit from the US and established partnerships with CRE in China and the Tatas in India which provide continued access to two of the world’s most exciting markets, consistent with a sustainable level of future investment,” Tesco chief executive Philip Clarke said today.

The announcement comes as a surprise as Tesco’s joint venture in India may run into trouble if the BJP comes to power and decides to roll back FDI in multi-brand retail.

Earlier this year, Rajasthan scrapped FDI in multi-brand retail after the BJP ousted the Congress government in state polls. Tesco became the first global retailer to apply for multi-brand retail after the Congress-led UPA government allowed 51 per cent FDI in the segment in September 2012.

Challenging conditions

Tesco has reported a 6 per cent fall in group trading profit to 3.3 billion in the year to February 22. In the UK, profits fell 3.6 per cent to 2.2 billion and sales dropped 1.4 per cent.

“Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change,” said Tesco chief executive Philip Clarke.

In the UK, Tesco faces stiff competition from smaller rivals such as Aldi, Lidl and Waitrose, while in Europe the Eurozone crisis continues to impact spending.

 
 
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