NEW DELHI – India's top business conglomerate, Reliance Industries Ltd., unveiled an ambitious plan Tuesday to venture into retail, investing billions of dollars and hiring thousands to create a network of giant Wal Mart-style stores.
Reliance Industries — known for its ability to plan and execute big projects — would set up a new company with a capital base of $2.2 billion to foray into retail, Chairman Mukesh Ambani told the annual shareholders' meeting.
The announcement comes as global retailers like U.S.-based Wal-Mart Stores Inc. (WMT) and Germany's Metro AG have been lobbying the Indian government to open its retail trade to foreign investment. But opposition from communist coalition partners and domestic businesses has forced the government to move slowly.
At Wal-Mart's shareholders meeting this month, chief executive Lee Scott reiterated the company's eagerness to break into the India market. Wal-Mart has applied to the government to open an office in Bangalore, and the company has many suppliers in India, having bought $600 million in goods in India last year.
India's booming retail market — estimated at about $200 billion — is dominated by more than 12 million mom-and-pop shops. Large, air-conditioned stores remain a rarity, even as rising middle-class incomes and an increase in demand for branded products are driving a retail surge in India. Selling through company-owned network stores currently totals just $8 billion.
The new company, Reliance Retail Ltd., would "build a business that would focus on competitive offerings to Indian consumers" across much of the retail spectrum — from food to footwear, ovens to home computers, Ambani said.
The company has 2,000 employees working on its retail plans. That number is expected to swell to 10,000, he said, and eventually to 500,000.
He did not say when he expects the first stores to open.
Analysts said it was unlikely that global retail giants would be deterred from trying to enter the Indian market because of Reliance's plans.
"There will still be enough room for more players," said Nagarajan Narasimham, an analyst at credit rating agency Crisil Ltd.
But companies like Wal-Mart may be forced to change their expansion strategies in India. Instead of building their own network, global retailers may have to buy out Indian companies that are already in the trade.
While the government delays opening the sector, some Indian companies have been buying up land available for commercial development. Foreign retailers may therefore find it easier to invest in existing businesses than try to find the space to build their own, Narasimham said.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox