For Tata's Trent, Zara is just a 'financial investment'

Tata-owned Trent looks at its joint venture (JV) with Spanish retailer Zara as a "financial investment" and not a "long term strategic investment," the company said in its latest annual report.

Trent has 49 per cent stake in the JV - Inditex Trent Retail India. Inditex, which owns Zara, the rest. "The company views its commitment to this JV primarily as a financial investment and consequently, it may be appropriate not to consider this as a long term strategic investment integral to other retail operations," Trent said in its sixty third annual report. It added majority partner (Inditex) "entirely controlling" the core customer proposition with respect to the fashion offer."

Trent and Zara set up the joint venture in February 2009 and run 16 stores. Since inception, Zara has become the fastest growing brand in the country. The JV posted total revenue of Rs 720.6 crore in 2014-15 as against total revenues of Rs 581 crore in 2013-14.

"..Plans are to open a few more Zara stores in India over the next three to four years in the major cities - the primary challenge to faster expansion is the availability of high quality retail spaces which can be expected to generate reasonable sales throughput," Trent said.

Trent also has a joint venture with Inditex for the latter's Massimo Dutti brand whose stores are yet to be opened.

Tesco Hindustan Wholesaling was basically set up for rolling out Tesco's cash and carry stores in India but once the plan was scrapped, the company was used for sourcing products for Trent Hypermarkets.

Prashant Agarwal, joint managing director at Wazir Advisors, says, "Like many brands, Zara must have come with an idea of handling the business on its own once it settles down in the country".

"Company like Inditex does not do JVs normally. They came with a partnership as India is a tough market. They must have come with the strategy that after they settle, they will be able to manage the business on their own," Agarwal said.

"The local partner will get good valuations for its equity," he added.
A GROWING BRAND

• Trent says it has bought the entire stake in Tesco Hindustan Wholesaling, a unit of Tesco
• Tesco Hindustan Wholesaling is involved in wholesale trading of food and non-food products, FMCG, general merchandise, fruits, vegetables and staples
• It had also developed backend infrastructure in terms of warehousing, people and related processes