UK retailer Tesco has confirmed that it will invest GBP85m (US$132m) to establish a multi-brand retail joint venture with Trent Ltd, part of the Tata Group, in India.
The groups had signalled that they were looking at a deal to see Tesco take a 50% stake in Trent at the end of last year.
The news follows regulatory approval of the move from India’s Foreign Investment Promotion Board, Tesco said today (21 March).
Trent Hypermarket operates the Star Bazaar chain in India.
Tesco and Tata have worked in together in India since 2008. Under wholesale and franchise agreements, Tesco has supplied goods to the Star Bazaar chain.
The Indian business said the two companies would look to expand the Star Bazaar chain, which currently has stores in Maharashtra and Karnataka.
Tesco is the first international retailer to take advantage of the easing of Indian restrictions on foreign direct investment in multi-brand retail.
Foreign companies were prohibited from investing in multi-brand retail outlets in India and overseas retailers like Tesco sought wholesale and franchise deals.
However, last year, India said it would allow international investors to own up to 51% of multi-brand outlets.
International retailers including Carrefour and Wal-Mart have been studying the implications of the new regulations – and whether the remaining restrictions in areas such as sourcing could prove prohibitive to profitable growth.
Earlier this month, Carrefour CEO Georges Plassat indicated the company could reach a decision on whether to expand in India in “a matter of months”.