India clears Vodafone, Tesco investments worth US$1.5b

Tesco-store-in-Warsaw

An Indian panel on Monday cleared investment plans by British giants Tesco and Vodafone worth over US$1.5 billion, as foreign firms show new interest in the country since New Delhi eased barriers to foreign capital.

The Foreign Investment Promotion Board (FIPB) sanctioned a proposal by the world’s biggest mobile phone company Vodafone to buy its joint venture partners’ stakes in its Indian arm for 101 billion rupees (US$1.6 billion).

Tesco, the world’s third-largest retailer, had applied to the board for permission to invest an initial US$110 million in the Tata conglomerate’s retail business Trent Hypermarket.

“The board gave permission to Tesco and to Vodafone. Now the applications must go to the Cabinet Committee on Economic Affairs,” a senior foreign investment panel official told AFP on condition he was not named.

The move by Vodafone to buy out its partners comes after India opened the telecom sector to 100 per cent foreign ownership five months ago and comes despite a bitter tax row with the Indian government over its Indian investment that is under conciliation.

Before that, foreign ownership in phone firms was capped at 74 per cent.

New Delhi moved last August to open up its large and potentially lucrative retail sector to foreign companies to try to boost the slowing economy.

“We are pleased to have obtained FIPB approval to increase our stake in Vodafone India,” Ben Padovan, spokesman for the British group, said in an emailed statement to AFP.

The two British firms are seeking to tap growing affluence in the emerging market giant and offset saturated domestic and other developed markets.

Indian consumers are expected to spend ever increasing amount on goods from food, communication services to cars even though the economy has slowed sharply.

Analysts say Tesco’s entry could prompt other foreign retailers to take a plunge in the Indian retail market, expected to be worth nearly US$1 trillion annually in sales by 2023, according to industry estimates.

Tesco already supplies about 80 per cent of the goods in Tata’s 16 Star Bazaar and Star Daily stores in southern and western India after signing an agreement in 2008.

Until India relaxed retail ownership laws last year, foreign multi-brand retailers had been unable to sell directly to consumers. If Tesco’s proposal is successful, the British firm and Tata will have 50-50 ownership of Trent, the retail unit of tea-to-steel group.

Trent said earlier this month “its understanding of the Indian market” coupled “with Tesco’s unparallelled global retail expertise will allow us to leverage the tremendous potential of the market”.

Tesco has leapfrogged Walmart in entering the retail sector in India. The US retailer put plans to open up supermarkets in the country on hold after winding up a wholesale partnership with the retail arm of India’s biggest phone company Bharti Airtel.

The world’s biggest retailer is expected to stay focused on its wholesale business, which would help to build up its supply chain to support any future store venture in India, analysts say.

 

 

Source : Channel News Asia | December 31, 2013

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About thomasdinnocenzi

Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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