Britain's Tesco halts talks to enter Indian market

LONDON, Nov 25: Britain's Tesco Plc has halted talks with Indian conglomerate Bharti Enterprises Ltd, clearing the way for the world's biggest retailer, Wal-Mart, to clinch a deal giving it access to the lucrative Indian retail market.

A Tesco spokesman declined on Friday to say why Britain's largest retailer ended negotiations to form a joint venture with Bharti, but said it still planned to enter the Indian retail sector.

''We have decided not to progress talks with Bharti over a possible joint venture in India,'' the Tesco spokesman said.

''We remain excited by the opportunities available in India and continue actively to review how best we might enter the market. As this work progresses, we will be in a better position to give more detail.'' Bharti Chairman Sunil Mittal told Reuters in an e-mail that a partnership would be finalised soon, but refused to say who it would be with. Mittal said last month that negotiations were down to Wal-Mart and Tesco. Wal-Mart Stores Inc. did not immediately respond to requests for comment.

Foreign retailers are keen to enter India's rapidly growing market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, such as Germany's Metro AG and South Africa's Shoprite Holdings have chosen.

According to consultancy Technopak Advisors, the Indian retail industry is currently worth about $300 billion and is expected to grow to $427 billion by 2010 and $637 billion by 2015, with the entry of large Indian companies, including Bharti, Reliance Industries Ltd and the Tata group.

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Tesco's main focus now will be to open stores in the United States in 2007, a move that, if successful, is expected to be a big driver of its future growth.

The company has declined to comment on Polish newspaper reports this week that it is negotiating to purchase 200 retail stores in Poland from Dutch retailer Ahold NV.

''In our view, the key to unlocking the true value of Tesco is the international business,'' HSBC analysts wrote last month.

Tesco, like Wal-Mart, is looking to expand to new markets to offset the possibility of future saturation at home and the collapse of talks with Bharti, which it was widely expected to win, is a setback.

Yet, analysts said there was a still time to enter India while Tesco, which already operates in 12 countries, reiterated it would be able to achieve its plan to have 60 percent of its group space outside Britain by the end of year.

India's Financial Express reported last weekend that Bharti and Wal-Mart had agreed a master franchise agreement that would include hypermarkets, supermarkets and grocery stores.

The two would initially invest $100 million, going up to $1.46 billion, the paper said, quoting industry sources, but a spokesman for the Bharti group, which controls India's biggest mobile services provider, Bharti Airtel Ltd., said at that time no deal was completed.

Reuters