UK Retailer Forms 51:49 JV With
Indian Realty Co, Present Franchise Deal With Shoppers Stop To Coexist
Mother care, a UK retailer for kids and expectant mothers, is forming a 51:49 joint venture with India’s largest real estate company DLF, two people close to the development said.
While the company would continue its existing franchise agreement with department store chain Shoppers Stop, it hopes that the new JV will give it greater control over its Indian operations and ability to expand quickly in one of the fastest growing economies, they said requesting anonymity.
Both
DLF and Mothercare refused to confirm the developments brushing it off as “market speculation”.
Mothercare spokeswoman Catriona McDermott said in a statement that the company was committed to its ongoing expansion in the Indian market. She said the company has 21 stores in affiliation with Shoppers Stop, which will remain a Mothercare franchisee in India.
“Shoppers Stop continues to be a valuable partner in Mothercare’s ongoing Indian strategy,” she said.
The UK retailer had been in discussions with
DLF and Tata group retailer Trent for a possible equity partnership in India.
In the past, many foreign retailers, who nurtured a long-term view on India, have shunned the franchise route to form JVs with Indian partners. Last year, UK’s largest apparel retailer Marks & Spencer entered into a joint venture with Reliance Retail ending its franchise agreement with Planet Retail. Indian laws make it compulsory for a foreign retailer selling a single brand to take on Indian partner as the former can’t own more than 51% equity in a retail business. Foreign investment is still not allowed in companies that sell more than one brand.
A JV in India traces Mothercare’s recent move in China, which saw it breaking from its tradition of growing overseas only by franchising to local organisations. It has formed a joint venture with local partner Goodbaby in China.
“We envisage that we may engage in more joint ventures in future, though we will remain mindful of political, cultural and economic risks which attend international investment,” chairman Ian R Peacock said in the latest annual report, talking about China joint venture.
The UK retailer, which has 1,014 stores in 50 countries, including 609 stores outside the UK, sees the international market as “the biggest single growth opportunity”, as per its annual report. Mothercare reported an
International retail sales growth of 41%, as against 6.9% overall sales growth for FY09 to £723 million. Similarly, international same store sales were up 6%, as against UK’s 1.4% for FY09.
A joint venture with Mothercare further diversifies DLF’s portfolio of brands, which already has Giorgio Armani, Dolce & Gabbana, Salvatore Ferragamao, Sunglass Hut and Sia Home. The realty firm, which has been partnering foreign retailers—usually as junior ally—aims to have a stream of clients for its malls through these tie-ups.
A typical standalone store of Mothercare in India is 3,000-6,000 sqft, while a shop-in-shop is 1,800-2,000 sqft.
The retailer offers a range of products, including clothing, hardware and toys in India for mothers-to-be, infants and pre-school kids and sources over 70% of products sold in the country from global vendors.
Courtesy:- Et dt:- 08-09-2009
