Organised retailers in demand

Shares of four organised retailers rose by 0.84% to 2.80% at 11:36 IST on BSE after media reports suggested that the FIPB has approved the UK-based retailer Tesco's proposal to purchase 50% stake in Trent Hypermarket.

Trent (up 2.80%), Shopper's Stop (up 3.03%), Future Retail (up 2.48%) and Store One Retail India (up 0.84%), edged higher.

The S&P BSE Sensex was up 42.34 points, or 0.20% at 21,185.35.

According to media reports, FIPB, or the Foreign Investment Promotion Board, on Monday, 30 December 2013, approved UK-based Tesco Plc's proposal to enter the Indian multi-brand retail segment in joint venture with Tata Group company with an initial investment of $110 million. After the approval, Tesco will pick up a 50% stake in Trent Hypermarket (THL), a wholly-owned subsidiary of Trent, a Tata group company.

Earlier this month, Trent announced that it was in discussions with Tesco regarding an investment by Tesco in THL, which operates the Star Bazaar business and is engaged in multi-brand retail trading. In this context, Tesco made an application to the FIPB to enter into a partnership where Trent and Tesco will each own a 50% stake in THL.

THL currently operates 16 stores across the Southern and Western regions of India. The proposed partnership will operate and build on the existing portfolio of Star Bazaar stores in Maharashtra and Karnataka. The application envisages a minimum FDI in line with the applicable multi brand retail trading policy, the company said.

In September 2012, the Government of India had allowed 51% FDI in the multi-brand retail sector, but the sector has failed to see any investment so far due to stringent rules set by the government.

The government on 6 June 2013 clarified that the foreign supermarkets entering India must invest in new supply chain infrastructure, such as warehouses and cold-storages, rather than buying existing assets. The government had stipulated that at least 50% of the investment made by the foreign company must be in supply chain infrastructure.

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