Tesco takes another shot at the Indian market, adds Rs 67 crore in Trent Hypermarket that runs 51 Star food grocery stores
British retailer Tesco Plc is taking another shot at the Indian market with the Tatas, with both having invested Rs 67 crore each in their joint venture, Trent Hypermarket, after a gap of two years, according to regulatory filings. This puts a potential partnership that the Tatas were exploring with Walmart on the backburner, industry executives said.
Tesco once again wants to expand the food and grocery retailing business in India, which had lost steam over the past few years to Reliance and Amazon-Samara-owned supermarket chain More in the west and south, two senior industry executives said.
The company appointed Martin Bailie as the new managing director for the Indian business, replacing Jamshed K Daboo who continues as a board member and consultant. Bailie, who worked extensively in the UK, became chief operating officer of Trent Hypermarket in November, when the talks with Walmart were at a peak.
Trent Hypermarket runs 51 Star food and grocery stores, of which 12 are hypermarkets and the rest are supermarkets largely in Mumbai, Pune, Bengaluru and Hyderabad. The company issued equity shares to Tata and Tesco on a rights basis in March and June, according to filings submitted by Trent Hypermarket to the Registrar of Companies and accessed through data analytics firm Veratech Intelligence.
According to Veratech founder Mohit Yadav, the fact that the Tatas have put in Rs 67 crore in Trent shows that there is no intention of an exit anytime soon. “The revenue is growing and unit economics is strong. Overall, considering the scale of business, it’s not losing that much cash also,” he said. The Tatas and Tesco had infused Rs 85 crore each in 2018 and Rs 150 crore each in 2015, as per Veratech.
A Trent spokesperson said the partnership has been very strong and steady. “The commitment of both the partners to the JV has stayed unfettered through the evolution of Star bazaar’s business model over the last few years. Going forward, we are aligned on the business outlook and we also share a common long-term plan which has a very positive bias for growth in the Indian retail market,” the spokesperson said. While the Trent and Walmart spokespersons declined to comment on the possible partnership, emails sent to Tata Sons and Tesco did not elicit any response.
ET had earlier reported that the Tatas and Walmart were in discussions for a broader partnership in the Indian market including back-end cash and carry since the Tesco JV had expanded extremely conservatively. Trent Hypermarket’s sales increased 22.5% to Rs 1,234.93 crore in 2019-20, while losses widened to Rs 165.87 crore from Rs 84.56 crore.
The Trent spokesperson said losses increased on the back of an emphasis on sharp pricing, lower other income and adoption of the Ind AS 116 accounting standard for leases. The spokesperson said setting a viable and scalable business model for the retail business has been a key priority of both partners and the company has made “significant progress on this agenda in the last two years.”