Tuesday, January 19, 2010

Carrefour sees Future in India, may ink JV soon

Carrefour, Europe’s biggest retail chain, has agreed with Kishore Biyani of Pantaloon Retail to set up franchisee stores in

India after six years of wandering in the world’s second-fastest growing nation for partnerships, including with Mukesh Ambani’s Reliance Retail and real estate group DLF.

The Paris-based retailer, which is seeing revenues in its home country falling due to a tightening of spending by consumers, is expected to sign on the dotted line by March, said an executive familiar with the development.

When the deal with India’s retail king Biyani is formally announced, Carrefour would be the third among the big names entering the $390-billion Indian retail market after the Beast of Bentonville, Wal-Mart, and UK’s Tesco.

Kishore Biyani, CEO of Future Group, declined comment. Carrefour did not respond to an email from ET.

Carrefour, Wal-Mart and other big retailers from the developed world are keen to have a presence in India despite regulatory obstacles, hoping that the laws would be eased as it happened in the telecom and other sectors. Also, the cleaning up of excesses in the industry, after the exuberance of the past decade, is giving hopes of a more saner approach to business. In the last downturn, many retailers, including Reliance Retail, the AV Birla group’s More, which went on a spree in setting up outlets had to shutter many of them and a prominent name, Subhiksha, went bust. The losses continue for many, though it has slowed.

The Carrefour franchisee is likely to be a part of the Future Value Retail, a 100% unit of Pantaloon Retail, which owns hypermarket chains Big Bazaar and Food Bazaar. The Big Bazaar, which has 109 stores, contributes 65% of the Future Group’s $2-billion total revenues. Food Bazaar, a supermarket chain has 152 stores.

Carrefour has two entities in India — Carrefour WC & C India and Carrefour India Master Franchise Company.

Although the franchisee stores may be dealing with similar products as some of Mr Biyani’s existing outlets, it would serve the affluent upper middle-income and rich customers who don’t look for economy or hesitate to pay more for the experience of shopping in a luxurious atmosphere.

This would pit the Carrefour-Biyani combination against the Raheja group’s HyperCity that sells expensive products such as imported wine and whiskey.

Thierry Garnier, executive director in charge of international partnerships at Carrefour, is leading the negotiation with Kishore Biyani’s son and Future Group director Rakesh Biyani, the official said. Sameer Sain, CEO of Future Capital Holdings and a former Goldman Sachs banker, is helping Biyanis close the deal.

Negotiations get tough as parties attempt to factor in the future arrangements anticipating changes in rules.

Currently, Indian rules permit foreign direct investment in the wholesale business, which supply to other retailers, but not directly to customers, popularly known as cash-and-carry. Foreign investment is barred in multi-brand retail stores, while the likes of single-brand such as Nike and Reebok can be owned up to 51%. Multi-brand international ret

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