Trent sets up firm to run stores in non-FDI states

Tata run-Trent Hypermarkets has created a separate company to run its hypermarket stores in states that don't allow foreign investment in multi-brand retailing, such as Gujarat and Tamil Nadu.

This was after it entered into a joint venture with UK's Tesco, Trent said in its latest annual report. Tesco is the only international chain to have entered India's multi-brand retailing sector since the UPA government opened it to 51 per cent foreign direct investment (FDI) in September 2012.

In its proposal, the company said it would conduct multi-brand retail business in Maharashtra and Karnataka, two Congress-ruled states permitting FDI in retail. The multi-brand policy lets states decide if they want this in their area.

NEW STRATEGY

• Tesco is the only international chain to have entered India’s multi-brand retailing sector since the UPA government opened it to 51 per cent FDI in September 2012
• Trent Hypermarkets’ current stores are in Maharashtra and Karnataka, and it plans to open three to five more in those states

Of the 16 stores under the Star brand, four were in Gujarat and Tamil Nadu, opposed to FDI in retail. Trent Hyermarkets divested those stores into a separate subsidiary of its parent, Trent, called Fiora Hypermarkets.

Trent Hypermarkets' current stores are in Maharashtra and Karnataka, and it plans to open three to five more in those states. However, Trent said it "does not envisage expansion of Star banner stores in Fiora Hypermarkets". Sector analysts say Trent could merge Fiora Hypermarkets once Tamil Nadu and Gujarat allow FDI in retail. The company did not respond to an e-mail on the matter.

During the year under review, the like-for-like sales growth of Star Bazaar stores was 4.8 per cent, as against 7.9 per cent it saw during the preceding year. Like to like growth refers to growth coming from the stores in the business for a year or more.

Trent Hypermarkets recorded a five per cent increase in total revenue to Rs 821 crore (Rs 785 crore in 2012-13) during the period under review. Operating earnings were a negative Rs 55.8 crore (compared to a negative Rs 64 crore in FY13).

Trent said it had made conscious efforts to make a "compelling food range", the key differentiator for the Star banner stores.