Tesco Plc and Tata Group agreed to roll out retail chains in India

Britain’s Tesco Plc is set to become the first global retailer to set up multi-brand outlets in India under the liberalised foreign direct investment (FDI) policy. It has agreed to set up a partnership with the Tata Group’s Trent Hypermarket Ltd (THL), with an initial investment of 110 million dollar (about 675 crore rupee).

Tesco proposed to set up a 50-50 joint venture with its existing Indian partner Trent, a Tata group firm, to open retail stores in Bangalore (Karnataka) and Kolhapur (Maharashtra).

The proposed venture between Tesco and THL will sell products including food products, wine and liquor, textiles and garments, footwear, crockery, furniture, electronic equipments, jewellery and books and magazines.

Tesco and THL have applied to the Foreign Investment Promotion Board (FIPB) — the nodal agency to vet overseas investment proposals.

Foreign Direct Investment (FDI)
• An investment made by a company or entity based in one country into a company or entity based in another country.
• It is an investment made to acquire lasting or long-term interest in enterprises operating outside of the economy of the investor.
• The investment is direct because the investor, which could be a foreign person, company or group of entities, is seeking to control, manage, or have significant influence over the foreign enterprise
• Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange.

An Indian company may receive Foreign Direct Investment under the as given two routes under:
Automatic Route
FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.

Government Route
FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.

The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank.

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