Tesco gets CCI approval for Trent's 51% stake purchase

Approval comes when the political debate on FDI in multi-brand retail has revived

The Competition Commission of India today approved England-based retail company Tesco's purchase of 50% stake in Trent Hypermarket owned by the Tata Group.

Tesco was the only applicant for putting foreign direct investment in the multi-brand retail. Thecompetition watchdog after studying Tesco's case said that there was no horizontaloverlap in the business activities of Trent Hypermarket and Tesco Overseas and therefore it would not have appreciable adverse effect on competition in India.

Trent Hypermarket is engaged in the business of multi-format retail trading in India including hypermarkets, supermarkets and smaller convenience stores with 16 retail stores across India. While Tesco Overseas Investments a subsidiary of Tesco Plc is not present in the retail market in India it is the holding company for several of the Tesco Group's overseas retail businesses globally.

In 2008, Tesco Group, through one of its entities, Tesco Hindustan Wholesaling Private Limited entered into a wholesale supply agreement with Trent Hypermarket to supply merchandise to its retail stores. CCI in its order has taken note of the large players like Reliance Retail, Future Retail, Spencer's Retail, Bharti Retail, Aditya Birla's 'More', Shoppers Stop operating in the retail sector of India and said that Trent's annual revenue of Rs 785 crore during 2012-13 was insignificant as compared to the size of the overall retail market in India.

The ruling Bharatiya Janata Party has maintained its stance on FDI in multi-brand retail. "It isprobably is not best opened up now because medium and small sized traders orsmall farmers have not been adequately empowered," new Commerce and Industry Minister Nirmala Sitharaman had said.

Government has allowed 51% FDI inthe multi-brand retail. Since the FDI policy regarding multi brand retailing has not been implemented in the states like Gujarat and Tamil Nadu, Trent has entered into a stores transfer agreement with a subsidiary company Fiora hypermarket on March 31, 2014. In its proposal to the Foreign Investment Promotion Board (FIPB), in December lastyear, Tesco had told the government it would invest in Karnataka and Maharashtra, both favouring retail FDI, for a 50% stake in a joint venture with Trent Hypermarket.

It would open four to five stores in thecountry every year, according to the proposal.FIPB, whileclearing the application the same month, had put the condition that Star Bazaar's "three stores in Gujarat and one in Tamil Nadu must be divestedby Trent Hypermarket prior to the investment by the foreign investor inTrent".