Limit presence, but FDI in retail is a must: Noel Tata

At a time when the issue of opening up multi-brand retail to foreign companies is again gathering momentum, Noel N Tata, the man who played a key role in evolving the retail blueprint for the Tatas, has said foreign direct investment (FDI) must be allowed in all areas of retail in order to give “customers a maximum amount of choice”.

The reticent and extremely media-shy Tata, in an exclusive interaction with Business Standard, said while the government was discussing various conditions in order to protect small retailers, he “would rather see a simple yearly cap on square footage that can be opened by retailers enjoying FDI than some of the conditions that are being contemplated.”

Interestingly, even the government now seems to thinking on similar lines. There is a growing consensus within the government that multi-brand retail should be opened up, but only in the six big metros of the country instead of the earlier prescribed footprint of any city with over one million population.

Over the last 13 years, Trent, which Tata headed till earlier this year, has emerged as the flagship retail company for the over $70-billion salt-to-steel conglomerate. It operates 94 multi-stores across formats like Westside departmental stores, Landmark, the book and music chain, and Star Bazaar hypermarkets. It has successful joint ventures with Tesco, the world’s third-largest retailer from the UK, and Spain’s Inditex Group, and a not-so-successful one with Italian fashion house Benetton.

Noel Tata recently moved to Tata International, the trading arm of the group, as the managing director. But even there he is spearheading the entry into footwear retailing with Tashi stores.

The Tatas have always harped on profitability and not rampant scaling up. “We have not as yet seen economies of scale translating directly into profit,” he pointed out and went on to say, “Our experience has also shown that scale alone does not bring profitability and we have found that margins do not expand as people expect them to do.”

But even then, in just two decades, the group has managed to become the second-largest retailer in the country with a combined turnover of Rs 9,544 crore in FY’11 from 2,144 stores in 13 formats. More important, where the Tata group stood out was in its ability to spawn a profitable operation. Barring Pantaloon, Future Group’s flagship company, Titan and Trent are the only listed retailers that have been profitable in the last five to six years.