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Tesco, Vornado To Enter India in Separate Deals

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There have been two big announcements in the past 24 hours regarding the entry of major players in retail and retail real estate entering India.

In one deal, Tesco has signed an agreement with Indian corporate giant Tata to form a joint venture that will bring the British retailer into the country. The deal gives Tesco a presence now in the world's three biggest retail markets--the U.S., India and China.

"We have had India on watch for quite a while and in the last few years we have felt that the time is getting closer," said Mr Clarke, Tesco's international and IT chief. "That's why it's taken me so long and I'm very pleased to be here."

Restrictive foreign direct investment rules in India allow overseas supermarket chains to operate as wholesalers but not as retailers. That means if Wal-Mart, Tesco or Carrefour wants to open a hypermarket, it has to find a franchise partner to own and operate that store.

Under the terms of yesterday's Tesco-Tata tie-up, the British chain will spend £60m on three cash-and-carry outlets in Mumbai, Delhi and Bangalore over the next two years. Those Tesco-owned sites will supply goods to Tata's retail stores and the British grocer will also offer up its retailing know-how in return for a fee.

Finding the right partner has proved a hurdle for Tesco, which suffered a big setback in 2006 when prospective partner Bharti Enterprises ditched it in favour of Wal-Mart.

Meanwhile, Vornado Realty Trust said Wednesday it has formed a joint venture with India's Reliance Industries Ltd. to invest in shopping centers in India.

The centers will contain 500,000 to 1 million or more square feet, and "typically be anchored by a hypermarket to be owned and operated by Reliance," Vornado said

Reliance, which operates more than 700 retail stores in India, is India's largest publicly traded company, with market capitalization of more than $75 billion and annual revenue of more than $34 billion. The firm has interests in the petrochemical business, besides exploration, refining and retail sales of oil.

Past news and analysis on India's retail scene.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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