The Competition Commission of India (CCI) on 28 May 2014 approved the British retail major, Tesco’s plan to purchase 50% stake in Tata Group firm Trent Hypermarket. This is the first FDI transaction in multi-brand retail segment, since the sector was opened up in September 2012.
CCI approval came after it found that Tesco purchasing of 50% stake in Trent would not result into any horizontal overlapping of business activities and thence, it was not an unfair competition. Further it found that annual revenue of Trent was 785 crore rupees during 2012-13, which was insignificant when compared to the size of the overall retail market in India.
Earlier in December 2013, the Foreign Investment Promotion Board (FIPB) approved the proposal of Tesco to invest 680 crore rupees in Karnataka and Maharashtra for a 50% stake in a joint venture with Trent Hypermarket.
Since the FDI policy regarding multi brand retailing has not been implemented in the States like Gujarat and Tamil Nadu, Trent entered into a stores transfer agreement with a subsidiary company Fiora hypermarket on 31March 2014.
About Trent Hypermarket (THL)
Trent Hypermarket is a firm that is engaged in the business of multi-format retail trading in India. It has hypermarkets, supermarkets and smaller convenience stores with retail stores across India. The company was established in 1998 and runs lifestyle chain Westside, Star Bazaar, a hypermarket chain, Landmark, a books and music chain and Fashion Yatra, a complete family fashion store.
About Tesco Overseas Investment Limited (TOIL)
Tesco Overseas Investment Limited as an organisation is a subsidiary of Tesco PLC. At present, it is not present in the retail market segment in India. It is the holding company of several of the Tesco Group’s overseas retail businesses across the world. The Tesco group entered India in 2008 through one of its entities named Tesco Hindustan Wholesaling Private Limited. In 2008, it entered into wholesale supply agreement with THL to supply merchandise to its retail stores.
Some large players of retail markets in India are Reliance Retail, Spencer’s Retail, Future Group, Aditya Birla’s More, Bharti Retail, Shoppers Stop and others
Comment and Analysis
This approval by the CCI will be a point of political debate now for the newly appointed Government under Narendra Modi. This government has been against the FDI in the multi-brand sector. Also the Nirmala Sitharaman, the Union Commerce Minister after assuming her office on 27 May 2014 termed that the FDI in multi-brand retail is best if not allowed as it will impact the lives of medium and small-sized traders or small farmers who has yet not been adequately empowered.
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