British supermarket giant Tesco has announced a joint venture in India on Friday with a company owned by Tata Group to invest in a chain of grocery and household goods stores.
It is the first multinational entry into India's vast but underserved supermarket sector since the country allowed such investment in 2012.
Tesco said in a statement it would invest STG85 million ($A155.95 million) to take a 50 per cent share of Tata-owned Trent Hypermarket Ltd, which operates the Star Bazaar chain. It said the chain would operate 12 stores in southern and western India selling food and groceries, home and personal products, plus fashion and accessories.
Other major international multi-brand retailers have stayed out of India's $US400 billion ($A443.39 billion) market in retailing - despite its huge potential for growth with a population of 1.2 billion people who now shop mostly at small family-owned stores. Most have cited strict local-sourcing rules they say make doing business in India too difficult.
In a politically sensitive move, India last year gave the green light for international companies to open multi-brand retail stores, but to allay concerns about the impact on small traders and family-run shops, those companies must obtain 30 per cent of their products from local small and medium-sized businesses.
The world's largest retailer, Wal-Mart, prominently split from its Indian business partner last year and shelved plans to open its own stores, saying it could not meet the local sourcing rules and make a profit.
Tesco, Britain's largest retailer by sales, focuses heavily on food and groceries that are easier to buy from small Indian suppliers. It has since 2008 been running a wholesale business to supply goods and technical knowledge to Trent Hypermarket.
The Tata Group, owner of Trent Hypermarket, is one of India's largest and best-known conglomerates. Its more than 100 companies include Tata Motors, owner of the Jaguar-Land Rover brand; Tata Steel; Tata Consultancy Services; Tata Beverages, the maker of Tetley brand tea; and holdings in insurance, investment and telecommunications.
