Reliance indicates alliance talks with Carrefour; French retail giant denies them

Mukesh Ambani owned, Reliance Industries, as reported earlier, is inching forward towards acquiring a stake in the world’s second biggest retail group, France based Carrefour.

“Talks are at an advanced stage,” a senior Reliance official told AFP. “We are talking (about an alliance) at the global level, this is not only for India.” Reliance source further said that the alliance could take the form of “a controlling stake (in Carrefour)” or a “joint venture.”

Carrefour in a statement has, however, denied such talks: “Carrefour states that it has had no contact with this group (Reliance) and no negotiations are under way.”

Reliance, India’s biggest listed company in the private sector, has recently entered the lucrative retail sector and has committed an investment of Rs. 30,000 crore, in the first phase of what it calls a “farm to fork” initiative. While, Reliance has already rolled out 71 neighbourhood, convenience stores, in several parts of the country, it’s gearing up to also roll out hypermarket, supermarket and speciality store formats, in the next few months. Reliance hopes to achieve annual sales of $25 billion (over Rs. one lakh crore) by 2011, which according to its Chairman Mukesh Ambani, will transform India’s retail landscape.

By entering into an international joint venture with Carrefour, Reliance would catapult itself into the select club of the world’s biggest retailers.

While, through the joint venture, Reliance will get access to international markets for Indian products, particularly agri-products, it will also leverage strong supply chain systems of the French retailer.

Last week, Carrefour had declared:” it was preparing to develop new engines for growth in countries with strong growth potential such as Russia and India.”

The French retail giant was initially in talks to tie up with Bharti, however, the Indian telecom giant decided to strike a deal with Wal-Mart for a cash and carry venture.

Last month, a Carrefour manager had told AFP that the company was in talks with “five or six Indian groups” about entering the country’s retail sector, but did not name them, and said an agreement would be announced “in a matter of months.” These groups, among others, according to market sources, included, housing and banking giant HDFC, cookies and textiles major Bombay Dyeing, and telecom and energy major Reliance ADAG. Carrefour had, earlier, called off negotiatons with the Dubai base Landmark Group.

A rapidly-growing affluent middle class comprising about a third of India’s 1.1 billion population annually spends an estimated $300 billions on shopping. Three percent of this, or roughly nine to ten billion, is contributed what is called organised or modern retail. Growing at around 25 percent per annum, the figure gor organised retail is likely to more than double by 2010.

Ambani’s sights, according to The Economic Times, were set on “turbo-charging Reliance Industries into the global super-league” with a war chest of up to 30 billion dollars.

Carrefour was rocked last week when France’s richest man and controller of the LVMH luxury goods empire, Bernard Arnault, teamed up with US private equity group Colony Capital to buy nearly 10 percent of the company.

The purchase by Arnault was followed hours later by the resignation of Carrefour’s chairman Luc Vandevelde amid disagreements with the Halley family, the main shareholder.

Source : IndiaRetailBiz