Carrefour to partner with HDFC?

Notwithstanding the uncertainty gripping the retail sector, subsequent to appointment of ICRIER to study the impact of big retail on traditional ‘Kirana‘ (mom & pop) stores, here comes the news of a possible tie-up between the world’s, France based, second biggest retailer Carrefour (2006 global sales: Euro 87.422 billion, of which Euro 41.675 billion from France) and the country’s housing finance and banking behemoth HDFC, for the former’s retail foray into India, according to a news report published in the Economic Times.

This is quite surprising as Carrefour was considered to be close to signing a deal with Nusli Wadia controlled Bombay Dyeing, after it had earlier called off its talks with Landmark, the Dubai based retailing group. Carrefour was also said to be in talks with the Aditya Birla and Anil Ambani Groups, in this regard.

Since, both Carrefour, as per present retail policy guidelines on FDI in multi brand retail, and HDFC, which is working within the framework of RBI regulations, can not directly enter into the retail business, they may go for a three way joint venture. A seperate entity (say, a PE fund) floated by HDFC could, according to the report, tie up with a third entity which would have Carrefour’s franchisee licence to do retail business in India. Incidentally, multi brand, foreign retailers, under the present policy guidelines, are allowed to offer franchisee licencing rights to a domestic player.

While, HDFC’s strong retail banking, insurance, and housing finance network would help the joint venture reach the potential customers, it will also be able to leverage the same to cross promote each others products. Moreover, HDFC’s decades old experience in real estate as well as the huge landbank owned by HDFC’s realty fund will be of immense interest to Carrefour, since realty constitutes a critical cost component in hypermarket format retail business which is Carrefour’s forte.

Although, Carrefour operates in hypermarket, supermarket, hard discount and convenient store formats with 12,547 stores across the world, majority of its revenues (60%) comes from its hypermarket chain comprising 1,040 stores. The convenient stores formats on the other hand contributes ony 17% of the total.

It is also believed in knowledgeable circles that while Carrefour may be satisfied with providing manpower to spearhead the front end operations of the retail business in India, it may look at owning 100 percent of the cash & carry business, for which there are no policy restrictions. While multi brand foreign players like Metro AG (Germany), Shoprite (South Africa) and Marks & Spencers (UK) are already active in the cash & carry business in India, Wal-Mart, the world’s biggest US based retailer, has applied for investing in the cash & carry business.

Among major local retailers, currently Reliance and ITC are active in cah & carry operations through their ‘Rangers Farm’ and ‘Chaupal Fresh’ formats respectively, throgh which they supply of ‘farm fresh’ products to small traders and push cart vendors in bulk.

Source : IndiaRetailBiz