Mukesh Ambani’s Reliance Retail set to buy Carrefour’s India Assets

Mukesh Ambani’s Reliance Retail has achieved quite a high level of success in recent times. The retail chain has invested a lot in its expansion in rural and urban India and as constantly reinvented some of its store formats to appeal more to the local crowd. The chain reached profitability this past year, much to the delight of RIL Shareholders and Mukesh Ambani, the Chairman and Managing Director of Reliance Industries Limited (RIL), the parent company of Reliance Retail. As such, in the recent Annual general Meeting of RIL, Mukesh Ambani made a special note of Reliance’s retail plans. In his speech, Mr. Ambani mentioned the need to expansion of retail chains and sought to increase the profitability as well as visibility of the stores from the consumer’s perspective. With this as the target, the retail division of RIL did indeed start aggressively planning on increasing its foothold in the highly-lucrative sector.

New Acquisitions:

Carrefour is the world’s second largest retailer. The French Company had been in India for little under two years after Foreign Firms were allowed to consolidate their presence in 2012. Now, the French giant has decided to leave India and move its targets back to Europe and other emerging markets like China and Brazil. The retailer has not only quit India, but a host of other underperforming markets, including Singapore, Malaysia and Greece, under chief executive Georges Plassat’s three-year revival plan. The chain operated five stores in India.

Reliance Retail and Bharti Enterprises are believed to be in race to buy India assets of Carrefour who, like many stores of Reliance Retail operate on a cash and carry format. For many key decision-makers at RIL, the allure of readymade cash and carry stores and the associated infrastructure may be too difficult to ignore. Both Reliance Retail and Bharti Enterprises spokespersons declined to comment.

In a statement regarding its exit from India’s retail sector, a Carrefour statement said, “Closure of Carrefour’s business in India will be effective at the end of September 2014. Until that time, the company will continue to be fully engaged with all its employees, suppliers, partners and customers to ensure a smooth transition.”

The $500 billion retail sector was opened up to foreign supermarket operators in 2012 but mandatory local sourcing requirements and the policy of letting state governments decide whether to allow global chains in their states has deterred new entrants. The Narendra Modi government has also opposed foreign investment in the supermarket sector, fearing it will harm small shopkeepers.

For Indian Firms like Reliance Retail though, acquiring assets like these can only help in strengthening their brand across India’s incredibly vast geography and lead to an increase in profits – something which the RIL-owned company seems to have mastered, even in the light of a dismal economy.

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