Retail reality: Carrefour eyes tie-up with HDFC

FOR those waiting for Carrefour to announce its India-entry plans with landmark, Wadias or the Aditya Birla group, this could come as a big surprise. The French retailer is learnt to have a new partner in the works: the HDFC group. The actual entity could be a private equity arm of HDFC. Details of the exact arrangement that the two companies are looking at could not be found. When contacted by ET, Carrefour India’s newly-appointed head Freis Muth said: “We cannot comment on this at this point of time.” On being asked if he is denying possibilities of an arrangement with HDFC, he just said: “No comments means no comments.” HDFC executive director Renu Karnad said: “Nothing like this is on at this point of time.” Whereas Carrefour cannot do business in India in general retail on its own as foreign direct investment is not allowed in the sector, RBI regulations prohibit HDFC or HDFC Bank from getting into retailing.Sources confirming talks between both the companies said that it could possibly be a three-way joint venture. HDFC could float a separate holding company, may be a PE fund, which would tie up with a third entity for getting Carrefour’s franchising rights for India, a source said. Meanwhile, it is understood that Carrefour will completely retain the back-end wholesale operations, as 100% FDI is allowed in cash-and-carry segment. Even though Carrefour cannot invest in the equity of the retailing business, it will get its own people to spearhead the venture. A third player may come in as FDI and RBI norms make Carrefour and HDFC ineligible to do retail business in India .
MATTER OF LAND
For large-format retail players like Carrefour, getting viable real estate is a prime concern; hence the talks with HDFC.
Access to land banks
FOR retailers like Carrefour, who generate most of their business from large format hypermarkets, getting viable real estate is the prime concern. HDFC, on its part, has a separate realty fund, which has access to a huge land bank in various parts of the country. In addition, this fund has an equity stake in some large scale projects of prominent real estate developers, such as Ansal API, Pune based realtor Vascom Engineers and L&T Urban Infrastructure. The holding company could leverage its relationship with these developers in the company's total business. On the other hand, the convenient stores make for just about 17%.

Courtesy:EconomicTimes

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