Carrefour said to be in talks with HDFC Group for Indian retail venture

Carrefour is reportedly partnering with the HDFC Group for it Indian retail operations. The actual entity could be a private equity arm.

In a somewhat complicated yet a highly complicated structure, HDFC could float a separate holding company, most likely a PE fund, which would, in turn, tie up with a third entity for getting Carrefour’s franchising rights for India. 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. Details of the exact arrangement and modalities that the two companies are looking at could not be found. Both Carrefour and HDFC have declined to comment on the issue.

It is to be noted that Carrefour cannot do business in India in general retail on its own as foreign direct investment is not allowed in the sector. At the same time, RBI regulations prohibit HDFC or HDFC Bank from getting into retailing.

Carrefour has particularly evinced interest in HDFC because of obvious real estate considerations. 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 getting access to prime real estate for the retail business.

Read The Economic Times article.