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Indian Store Chain Plan is a Blow to Tesco Hopes

Posted on: Friday, 7 April 2006, 21:00 CDT

By Dean Nelson, Evening Standard, London

Apr. 7--Tesco's hopes of breaking into India have suffered a setback after it emerged that one of the country's richest men is to launch a nationwide store chain.

Mukesh Ambani's Reliance Group plans to open 500 stores, with the first in Mumbai, Gujarat and Delhi. He also wants to buy 25 cargo planes to transport produce from remote farms to his stores.

Tesco had hoped to be among the first to tap into India's increasingly wealthy middle class, and had been in talks with mobile phones magnate Sunil Mittal about launching a $1 billion (£570 million) supermarket chain to exploit the country's $250 billion retail market. It already has a support centre and non-food sourcing operation in Bangalore.

The talks began amid speculation the Indian government would lift its bar on foreign investors owning more than 26 percent in retail joint ventures. Ministers removed restrictions on foreign single-brand chains earlier this year.

India is desperate for investment in its farming and logistics sectors as almost half the fruit and vegetables it produces rots before it reaches the market. Ministers are hoping major supermarket chains will help turn the country into a net food exporter.

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Copyright (c) 2006, Evening Standard, London

Distributed by Knight Ridder/Tribune Business News.

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TSCDY, TSCO,

Source: Evening Standard

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