The deal values Ranbaxy, India’s biggest drug maker and one of its largest firms, at 737 rupees per share and represents a 31.4 percent premium to its Tuesday’s closing share price.

“I like this deal very much,” said Kenji Masuzoe, senior pharmaceuticals analyst at Deutsche Securities.

“The pure pharma business model has limitations and the industry has to think about hybrid models like pharma and agribusiness or pharma and generics,” he said.

Shares in Daiichi Sankyo, Japan’s No. 3 drug maker and best known for its high blood pressure medication Benicar, ended nearly 5 percent higher at 2,975 yen on early reports of a deal. Ranbaxy’s shares rose 1.5 percent to 569.1 rupees.

Under the deal, Daiichi Sankyo will buy the 34.8 percent controlling stake of Ranbaxy’s founders, the Singh family, and make an open offer for a further 20 percent of Ranbaxy shares, as per Indian regulations. The total transaction value is expected to be worth between $3.4 billion to $4.6 billion, the companies said in a statement. Ranbaxy said the deal values the company at $8.5 billion.

“It was overdue for quite a long time for an overseas firm to acquire an Indian drug maker given the cost advantages we offer,” said Sarabjit Kour Nangra, vice president of research at Angel Broking. “Daiichi’s offer for Ranbaxy is definitely a good one and valuations are quite satisfying.”

The deal is the second-biggest purchase of shares in an Indian firm by a foreign company after Vodafone’s (LSE:VOD.L – News) $11 billion purchase of a controlling stake in India’s third-largest mobile phone operator.

Malvinder Singh, chief executive of Ranbaxy, plans to meet the media in India later. New Delhi-based Ranbaxy has grown internationally by selling generics, cheap copies of branded drugs off-patent, or by successfully challenging the patents held by western firms. Hit by spiraling healthcare costs, governments around the world are increasingly seeking to maximize the use of generic medicines, which are becoming more available for a large range of drugs as patents expire. Ranbaxy’s guidance is for 20-25 percent profit growth and 18-20 percent revenue growth for 2008. In the first quarter, its consolidated profit rose 7 percent to 1.53 billion rupees. Consolidated sales were 16.2 billion rupees.

Daiichi Sankyo, also in the media spotlight for its experimental blood thinner prasugrel that it is co-developing with Eli Lilly and Co (NYSE:LLY – News), said it would finance the deal with bank loans and cash. The deal follows Takeda Pharmaceutical Co Ltd’s (Tokyo:4502.T – News) acquisition of U.S. biotech firm Millennium Pharmaceuticals for more than $8 billion and Eisai Co Ltd’s (Tokyo:4523.T – News) purchase of MGI Pharma Inc for $3.9 billion. Both Millennium and MGI Pharma are strong in cancer medicines.

Nomura Securities acted as the exclusive financial adviser to Daiichi Sankyo, while Religare Capital Markets, which is controlled by the Singh family, advised Ranbaxy.

(Additional reporting by Sachi Izumi, Mariko Katsumura and Aiko Hayashi in Tokyo and Rina Chandran and Hient methods including cash and check.

In April a Mumbai branch of Sahakari Bhandar, a dowdy Indian state-owned department store, closed mysteriously for renovation. It reopened a month later equipped with air conditioning and staff in bright uniforms. Goods on sale included everything from CDs to frozen peas. The new-look store had no name but details soon started to emerge about what had happened.

The store is just one in a chain, which includes at least 20 sites in Mumbai, being used as a dry run for a vast new retail concept by Reliance Industries Limited (RIL), the sprawling conglomerate and India’s largest private company. Reliance Retail, a newly launched RIL sub-sidiary, used the stores as a secret testbed for product lines and a new system of supply chain management. The experiment worked: sales at Sahakari Bhandar trebled.

The stores have given Indian shoppers the first glimpse of an operation of such scale and ambition that it is making global rivals such as Wal-Mart, Carrefour and Tesco shudder.

Mukesh Ambani, RIL’s chairman, plans to open 100m sq ft of retail space in India by 2010. Local press reports talk of between 5,000 and 10,000 stores spread across 1,500 towns and cities. Ambani has described the concept as “a pan-India footprint of multi-format retail outlets”.

Reliance will operate hypermarkets, convenience and speciality stores, as well as business-to-business operations, selling food, clothing, electrical goods, consumer durables, luxury goods and financial and travel services. The project will employ 1m people within five years.

In developing the chain, Ambani is doing far more than simply opening a network of shops. He is revolutionising the Indian food chain, setting up a nationwide distribution infrastructure from scratch, and transforming the way that India’s 1bn-plus inhabitants consume.

Centuries of tradition and established patterns of living are woven into this process. In essence, Reliance is aiming to turn a fragmented, localised, largely rural economy into an organised, process-driven, modern retail environment.

“Without a doubt, this is the biggest retail launch in India’s history,” says P Phani Sekhar, an analyst at Angel Broking, based in Mumbai.

Reliance refused to talk to The Sunday Telegraph about its plans and two of our photographers were removed by security staff. The first proper new store was due to open in Hyderabad this month However, Indian retail sources say the opening has been delayed because of the scale of the project. The chains’ names are a closely guarded secret, although Fresh Plus is mooted for the food outlets.

Reliance Retail’s launch is based on an audacious business bet. Wal-Mart and Tesco are beating at India’s door but have not been granted entry because of restrictions on foreign ownership in the retail sector. The industry is likely to be liberalised soon and the potential is vast. A business delegation from the Bush Administration is visiting in the autumn. An announcement could be made then. So-called “organised retail” (sales from chain stores rather than kirana, or market stalls) accounts for just 3.3 per cent of the £130bn retail market, but it is growing at 30 per cent a year. With incomes soaring and a ferocious appetite for consumerism, this growth shows no sign of abating.

If Ambani’s concept works, it will be a masterstroke in pre-empting the international competition’s entry and beating them at their own game. On top of this, Reliance has been signing deals with farmers across India, hoovering up the country’s supply of fresh food.

It is a clever move: rival retailers will be forced to go to Reliance to procure their stock. The company is essentially cornering India’s retail and wholesale markets.

“All the outlets will be connected seamlessly through a state-of-the-art supply chain infrastructure. This initiative has been assiduously planned to connect the Indian farmer and producer with the consumer directly,” Ambani told shareholders in a letter.

Even rivals are impressed. “I don’t think there are many people who have gone into business with the commitment, style and grandeur in which it is planned,” says Phiroz Vandrevala, the executive vice-president of Tata Consultancy Services, a subsidiary of Tata Group.

Ambani’s target of 100m sq ft of space would catapult Reliance Retail into the global league of retailers from a standing start. It would be smaller than Wal-Mart, which has more than 450m sq ft in the US alone, and Carrefour, which has 285m sq ft globally, but it would dwarf Tesco’s 58m sq ft worldwide.

The project will cost up to £4bn, a figure Ambani appears happy to lay down. RIL has already invested £400m in the “pilot” stages of the project. Press reports in India suggest that this stage alone could comprise a breathtaking 1,575 stores within six months of launch.

A recent report by CLSA Asia-Pacific Markets, the brokerage, predicted that Reliance Retail could achieve sales of $20bn (£10.5bn) – or 5 per cent of India’s overall retail market – and profits of $1bn within six or seven years. This revenue target would give the company an implied market capitalisation of $17.5bn, which would make it one of India’s 30 largest companies. A stock market flotation is likely soon.

So how is Reliance achieving this?

The company has been busy signing deals with state governments to set up large rural hubs to buy vegetables, fruits, pulses and dairy products from farmers. In turn, these hubs will be supplied by hundreds of smaller satellite bases in India’s thousands of villages.

Traditionally, India’s farmers work in small co-operatives and sell at a local level. Not any more. Reliance is calling the process “food-to-fork” – showing its intention to create a total supply chain.

Last week Reliance signed a memorandum of understanding with the Punjab state government to acquire 1,100 acres of land and set up outlets. It will do similar deals in West Bengal, Haryana, Himachal Pradesh, Uttar Pradesh and Uttaranchal.

The Punjab deal attracted criticism from opposition parties that the land was being sold too willingly and at rock bottom prices. They also complained that government-backed farming co-operatives were effectively being transferred to a private company.

Others, however, are saying that Reliance is single-handedly causing “a second Green Revolution” (after the boom in Third World food production in the 1960s). For instance, it aims to procure 10m litres of milk a day.

Last month the Times of India reported that Reliance is buying a 40-strong fleet of 35-tonne cargo planes to transport the goods. It is thought to have recruited a director from Air India to oversee the massive logistics operation. The company is also expecting to open sourcing warehouses in China and Thailand and to forge deals with mall developers in India.

The project is not without substantial challenges. The first is changing India’s mindset about how it shops. The second is finding sufficient manpower at both store and management level.

“We have concerns over the availability of people. Retail being new in India, we don’t have the manpower. Reliance is looking to employ a serious number of people and for that it needs very good management,” says Sekhar of Angel Broking.

He believes that Reliance is scouring Europe, the US and Asia for retail talent. Others believe that Reliance is close to having a top-tier management team in place from the likes of Tesco, Marks & Spencer and Target, the US giant.

“Without expertise you cannot build infrastructure. You cannot build a dream on a cloud, you need a solid foundation,” says Susil Dungarwal, a director at Prestige Group, a Bangalore-based mall developer, and someone who was involved in the project in its early stages.

For its store staff, Reliance is shunning India’s millions-strong graduate class and is scouting villages within 100km of big cities to pick employees from rural markets. Villagers are seen as stable, relatively cheap and prepared to work long hours. They also have some retail experience.

Western retailers looking to India cannot afford to ignore Reliance’s foray. “A lot of companies like Tesco have already started negotiating about India but they have not taken a decision,” says S Jagadeesan, the economics minister at the Indian High Commission in London.

“In getting in early, Ambani is getting a huge advantage. UK retailers looking to go into India should take serious note of it.”

Kapil Dev Singh, Country Manager, IDC India said, “This growth comes on the back of a burgeoning mobile services market and lower entry barriers across various customer categories, as average selling values (ASVs) of handsets continue to fall in the wake of a highly competitive landscape populated by close to 25 vendors.”

FY 2007-08 also witnessed shares of higher-level air interfaces rising. EDGE and WCDMA-enabled mobile phones contributed 15.4% and 3.1% of the total mobile phone shipments in 2007-08 compared to 7.4% and 1.2%, respectively, in 2006-07.

Naveen Mishra, Manager, Communications Research at IDC India, said, “As the need of Indian mobile phone consumers is evolving, they are demanding feature-rich devices, which can cater to their business communication requirements as well as their personal needs.”

Shipments in Q1 2008 stood at more than 22 million handsets, which amounts to around 10,000 mobile phones being shipped every hour during the quarter. In the same quarter a year ago (Q1 ’07), just under 18 million mobile phones were shipped.

Overall, Nokia retained the top spot with a market share of 52.8%, followed by LG at 10.2%, and Samsung at 8.3% in terms of units shipped during the quarter ended March 31, 2008.

Posted to the site on 19th June 2008

Three Indian supermarket chains, SPAR, Hypercity and Nature’s Basket, and Indian import and distribution company Epicure Foods, have spent 10 days in Melbourne, Tasmania and Sydney to source quality Australian products for their fast-growing stores.

Cookies, confectionery, cereals, canned vegetables, juices and other products from 22 Australian companies are already on SPAR’s shelves in Bangalore.

“Many Indians are travelling the world and looking for international brands back home. About 35 to 40 percent of snack foods are imported,” SPAR Max Hypermarket India’s business manager Satish S V told media.

SPAR expects to import up to A$1 million (US$ 863,000 or Rs 37 million) worth of Australian products over the next year.

“Each of SPAR’s new stores will have two permanent gondola ends continually selling Australian products,” New South Wales (NSW) Minister for Primary Industries, Energy and Mineral Resources Ian McDonald said.

The supermarket officials have met over 45 Australian companies and experienced first hand what Australia has to offer.

“There is a general understanding in India that Australian food is clean, green and healthy,” Australian food consolidator Bemco Australia managing director Helen Pilakis told IANS.

The visit, organised by Bemco with support from the NSW Department of State and Regional Development (DSRD), follows a successful “Taste Australia” promotion held in Bangalore last November that introduced Indian consumers to more than 120 new food and beverage products from 22 Australian companies.

Most Australian products are targeted at India’s growing middle class, with huge disposable incomes, looking for ready and convenience driven products.

“Revolutionised retail with more shelf space is opening a new market where Indian customers are constantly looking for something new,” says SPAR’s senior category manager Nanda Kishore.

“At the moment, Australian dairy products can’t be imported into India, but buyers are hoping things will change by the year-end. We are looking at options for importing dairy products,” Kishore added.

Many Australian companies are producing food targeted at people with special dietary needs. Real Foods feels there is a market in India for its gluten-free rice cakes.

“Indians today are looking for gluten-free products and have a much broader flavour palate. Our expertise is in making six varieties of corn thins, thinner than normal rice cakes, which can be eaten as a snack, replacing a sandwich, or as a meal,” the company’s market coordinator, Charlotte Marbus, told media.

Another Australian company, Sweet William’s (William’s) makes vegan, gluten and nut-free, halal, kosher and sugar free chocolates.

“With high incidence of diabetes in India, people are looking for sugar-free chocolate bars. However, the prohibitive aspect of our product is the 60 percent customs duty on chocolates,” the company’s marketing and sales manager, Carol O’Halloran, told media.

Godrej-owned Nature’s Basket has already placed an order for salad dressings and sauces, cereals, honey, olive oils, biscuits and crackers.

“The products should be on our shelves by Diwali. Many of these products would be ideal for gift hampers over the festive season”, the company’s operations manager Sudhir Kadav told media.

“There is a wide range of cuisine available in Australia and we have noticed that retailers can ask manufacturers for specific products tailored to their specific markets”, Kadav added.

Supermarkets are looking at products that cater largely to the much travelled Indian clientele, non-resident Indians and the large number of expatriate Indians.

Mumbai-based HyperCity’s category managers for ready, gourmet and instant foods, Shweta Mohile and Y V Rao, said their company was looking at unique products, Australian Leatherwood honey, Macademia nuts, shortbreads, which can capture a niche market.

As Australia becomes more aggressive in its exports to India and the Indian retail market grows, Epicure Frozen Foods and Beverages managing director Sanjay Tandon and CEO (Operations) Murali Shankar said in the coming years, Australian products would be represented far more in their product range.

WHILE the world debated and discussed the $570 billion fiscal stimulus package announced by the Chinese government, few noticed a unique and innovative policy decision from the government across the straits in Taiwan. The Chinese had drawn up a massive bill, largely funded by tax payers’, to be spent by the government itself in boosting the economic activity. Taiwan, on the other hand, decided to give back some money to its citizens to spend by themselves, thereby creating demand for products in local markets, which in turn could boost economic activity and job creation.

Under a new policy announced in December 2008, the island’s 23 million people regardless of age or wealth were given 3,600 Taiwan dollars or around $165 as shopping vouchers. “The programme is aimed at boosting the economy and is expected to contribute to a 0.64% increase in 2009 GDP,” explained Premier Liu Chao-shiuan. The core belief behind this programme was government spending is not effective due to leakages and delay in execution, whereas private spending is far more efficient in boosting economic activity, creating demand for goods and services and raising employment levels. The idea of the voucher and stimulating growth through private consumption has been powerful enough for even the governments of Japan and Germany to consider such a move.

In India, private consumption demand has been the key driver of economic growth, with private final consumption expenditure contributing over half of India’s growth in the past decade. In fact, almost 68% of India’s GDP is accounted by private consumption, as against 39% in China, making the case for stimulating the Indian economy by growing private consumption far stronger than anywhere else in the world.

Yet, most policy prescriptions in India have focused more on government spending and some tax rebates to selective industries. Rather than depending on policy prescriptions that have been tried before, it is time, we start exploring innovative measures that can positively affect the economic scenario in India. With a young demographic profile and growing urbanization, increase in private consumption can have a much longer and sustainable impact in creating demand and jobs across the country.

Given the right policy prescriptions, modern retail could also play a major role in stimulating private demand in India. Contrary to popular sentiments, this year has truly been an inflection point for modern retail in India. One of the biggest stumbling blocks for retail to develop in India was the rising cost structures, led by the rise in real estate prices. For the first time in many years, we are witnessing a scenario wherein real estate costs are falling and the retail business is becoming more and more viable. Along with it, people costs and operational costs are also stabilizing. There are distinct signs of consolidation about to take place in retailing in India.

As the share of modern retail grows, so will its impact on the domestic economy. By 2012, modern retail will directly employ over 1.6 million people at shop floors. Almost all of them will come from lower income groups and lesser educational backgrounds and who might not have found employment in other sunrise sectors in India. In addition, retail will create millions of more jobs in support services like security, mall and facilities management, construction and supply chains. Reports by consultancy major, McKinsey & Co, point out that for the government level, modern retail will help improve indirect tax collection by 1%, add to GDP growth and play a role in controlling inflation.

Cities in India have few public spaces for people to converge. With the growth of modern retailing, shopping malls and high streets have emerged as modern India’s public spaces where the middle class comes and spends time with their family.

Yet, the role and contribution of modern retail in India is yet to be acknowledged. Even when sectors as diverse as IT, hospitality, multiplexes and real estate enjoy various fiscal incentives from the government, modern retail is largely ignored by policy makers. In fact modern retail is viewed as a luxury, and imposed with more taxes, discriminatory power rates and stiff regulations.

As we step into a new year, we are also entering a new era of business and economic environment. A new era calls for fresh thinking, exploring new scenarios and new solutions. Whether it is through deficit-financed tax cuts that will put more money in the pocket of consumers, or through vouchers that encourage people to spend immediately, we have to explore ways and means to further boost private consumption. And as modern retailers acquire size and scale, we have to work on government advocacy that ensures modern retail plays a far more decisive role in the country’s economic growth and development.

McDonald’s India is a 50:50 joint venture between McDonald’s and Hardcastle Restaurants for west and south India. For east and north India, the food retailer has a tie up with Vikram Bakshi’s Cannaught Plaza Restaurants. McDonald’s refrained from hiking prices despite rising pressure on input costs last year. “Currently, we do not see any reason for raising prices of our food items as the commodity prices, especially edible oil prices, have eased and our back-end supply-chain is strong enough,” Mr Jatia added. The largest fast-food retail network will invest around Rs 120 crore, excluding real estate, for its expansion. The food retailer offers services to 180 million customers every year from its 155 outlets and expects to manage the customer growth rate of 30-40% on y-o-y basis. Further, it has tied up with BPCL and HPCL to open restaurants at their upcoming motels on express highways.

Related post on MdDonald’s

When it comes to rural India, there are several limitations with our call centres. Villagers are usually not comfortable speaking with call centre executives or to a machine. Rural users prefer to be served in the local dialect by a local person. The rural space is very important to us as two-third of the new additions (of mobile phones) are expected to come from this segment from next year onwards. We tried a pilot to set up Rural Airtel Service Centres in Rajasthan. We are following the ‘four As’ model — availability, awareagent. They are not on the rolls of Bharti Airtel. These agents sell and exchange SIMs, (subscriber identification module cards in phones), they are empowered to activate, reactiness, accountability and affordability. The rural centres help us address these aspects. In all villages, we have identified an entrepreneur, who runs a multi-brand outlet, or a general store or any outlet, and have trained him to be an Airtel vate and recharge mobile connections and sell valueadded services amongst other things.

How has the experience been so far?

Post the pilot project in Rajasthan, we have established 3,000 such centres in the past couple of months. This will be expanded to 20,000 by March, with an aim to have one such centre in every village. We have noticed that the project acts as a big differentiator for our services. For instance, SIM replacement is a major concern in rural areas as they often get damaged.

Customers have to go to the nearest city to replace the SIM cards.
And how does the rural vendor who runs the Airtel centre benefit?

The vendor can increase his revenues by selling a host of services — from hello tunes, to music-on-demand and ring tones — and help customers activate and stop services on their mobiles. This would serve as an add-on revenue opportunity for him, already running another business.

Fathom this. Seventy per cent of India’s and 12 per cent of global population lives in rural India and contributes 50 per cent of the country’s GDP. Their population of 75 crore (750 million) is more than that of US, UK, France, Japan, Italy and Germany put together. In fact, as per Mckinsey, despite rising urbanisation, 63 per cent of India’s population will continue to live in the rural areas even in 2025.

Surging ahead in terms of growth

As per National Council of Applied Economic Research, rural market accounts for 55 per cent of LIC [Get Quote] policies, 70 per cent of toilet soap consumption, and 50 per cent of TV, fans, bicycles, tea and wrist watch consumption. So as a target market, it is attractive not only because of the size, but also because of impressive growth potential.

Rural GDP has been witnessing strong growth in the last four years (avg of 4 per cent) not only on the back of increase in minimum support prices for the agri-products but also due to availability of alternative employment opportunities.

Income_Distribution

Source: Business Today

In 2008, the rural areas grew at a robust rate of 25 per cent as compared to 10 per cent growth in urban retail market According to a McKinsey, rural India, would become bigger than the total consumer market in countries such as South Korea or Canada in another twenty years. It would grow almost four times from estimated size of $577 bn in 2007. While the per capita income is lower than urban areas, the customer base is thrice that of urban areas.

Resilient to slowdown

On account of negligible tax liability and little or no burden of loan repayments, the Indian rural population has a higher propensity to save. The rural areas account for 33 per cent India’s total savings. Being more conservative than their urban counterparts, the rural populace has not burnt their fingers in the real estate or stock market bust. Further, the rural income distribution pattern is also changing and the bottom is getting narrower.

While 18 per cent of rural India has earnings in the range Rs 45,000 to Rs 215,000 per annum, 58 per cent of urban population earns in this range. However, 27 m individuals form a part of this income bracket in rural areas while in urban areas it is about 29 m; of which large base is already tapped.

No of households (m)

Source : Ministry of Communications & Information Technology , India

As per the Associated Chambers of Commerce and Industry of India, the rural market is becoming increasingly attractive for FMCG, automobiles and organised retail businesses. Rural India accounts for more than 40 per cent consumption in major FMCG categories such as personal care, fabric care, and hot beverages.

FMCG sector in rural areas is expected to grow by 40 per cent as against 25 per cent in urban areas in the coming quarters. The size of retail market in India is estimated at US$ 280 bn of which the rural retail market works out to be $112 bn. This is expected to double in next 4 to 5 years because of the huge potential. Even auto companies in recent times are witnessing shift in trend as they are gearing to explore the huge market potential lying in the rural areas.

Source: Mint

As rural India becomes more lucrative and the government becomes more committed to its development, schemes like the rural employment guarantee, Bharat Nirman, focus on rural education, debt waiver plan and higher support prices will aid the rural demand. Although the penetration levels are still very low, the scope is huge. And India Inc. is not letting go of this opportunity.

India is an important market for us due to the opportunities it presents. We have plans to launch more than 32 new models here, of which six will be touch phones, while many other models will be 3G-enabled and some of these will also be entry level phones. At present, we have about three touch phones and six 3G-enabled handsets already in the market and we plan to have about 10 models each in both these segments by the year-end. We are betting big on the touch screen segment and we are targeting sales of up to six lakh units  and a 10% market share in this space alone within the next six months.

What will be your investments in India this fiscal?

We will double our investment this year and the company as a whole will spend about Rs 400 crore on advertising this year. Additionally, we will invest Rs 200 crore in R&D to study market dynamics and consumer behaviour here. We are looking at increasing our headcount in our sales vertical to enhance our presence.

How many of the products you sell here are made here? How have your sales been so far?

Currently, we manufacture mobile phones at two units located in Pune and Greater Noida and these plants have a production capacity of three million units per year. About 70% of the production is exported while the rest is for domestic consumption. We sold about 2.4 million GSM handsets in India last year and we expect a 50% increase in sales this year.

Our institutional sales account for just 10% our total mobile sales.
Currently the Indian mobile handset market is dominated by some of your competitors.

How are you looking at improving your brand visibility here?

LG is rapidly gaining market share in the GSM market, despite being a late entrant. We are already the fifth-largest player in the segment. I believe our distribution line was poor earlier, but now we are reworking our strategy here. Based on the analysis of our marketing team, we are deploying 1,000 additional shop sales executives and we will be launching about 1,000 additional shop-inshop formats in rural and tier II cities. On the organised retail front, the overall channel coverage is at 42%.

India is an important market for us due to the opportunities it presents. We have plans to launch more than 32 new models here… We are betting big on the touch screen segment
MOON B SHIN

MANAGING DIRECTOR, LG

But Indian consumers won’t be able to partake of Wal-Mart’s everyday low prices. India’s restrictive commercial laws prohibit most foreign companies from setting up shop to compete with domestic retailers. So Wal-Mart’s debut outlet, which will open in the city of Amritsar in northern India later this month, is a wholesale-only operation that will sell mainly to vegetable vendors, hospitals, hotels, restaurants and other companies. The Amritsar outlet won’t even carry the familiar Wal-Mart brand. To deflect the attention of politicians and activists who oppose the entry of foreign multi-brand retailers, the Little Rock, Ark., company has named its Indian outlets BestPrice Modern Wholesale.

Despite the stealth approach, industry experts expect Wal-Mart, known for squeezing efficiencies out of suppliers and supply chains, to have an impact on India’s $375 billion retail market, which is dominated by mom-and-pop businesses and outmoded distribution networks. “We can learn the science of retailing, how to build scale and efficiencies,” says Kishore Biyani, chairman of Pantaloon Retail, India’s largest homegrown retailer with 114 hypermarkets.

The world’s largest retailer isn’t new to India. For the past decade, the country has been an important Wal-Mart supplier of textiles, apparel, home products and jewelry. But in anticipation of its India launch, Wal-Mart for the last three years has been developing a network of suppliers to stock its stores with fresh produce and staples like lentils, wheat and rice — all with an appreciation for variations in local cultures and tastes. “India is not a homogenous market, so ours is not a cookie-cutter approach from the U.S.,” says Raj Jain, president of Wal-Mart India.

Although it is restricted to wholesale operations in its wholly owned stores, Wal-Mart has a small retail presence in India through a fledgling joint venture with New Delhi-based Bharti Enterprises. The U.S. company provides back-end support for Bharti’s chain of 25 Easy Day grocery stores that opened last year.

Although other foreign hypermarket chains are entering the country — British retail group Tesco has a joint venture with India’s giant Tata conglomerate, while France’s Carrefour is said to be in talks with Reliance — Jain says Wal-Mart is in no hurry to unfurl the Wal-Mart flag nationally. “The easiest thing is to roll out stores, but the most difficult is to sustain and feed them,” he says.

Indeed, Indian mass-merchandisers over the last several years expanded frenetically, trying to get a jump on foreign chains should Indian politicians eventually decide to open up the market to direct competition from overseas. Reliance Industries built 940 stores across the country in 18 months. Aditya Birla group has opened 548 stores since 2007. Today, with India’s economy slowing and with losses piling up, the domestic retailers have shut some outlets and laid off employees, partly because of difficulties in keeping large chains supplied with goods. “When you start opening stores and then work backwards, even we get scared,” says Mahadeo Pawar, a vegetable grower from Karjat, 31 miles (50 kms) north of Mumbai.

Caution in India may be a watchword considering the global recession and Wal-Mart’s blemished track record overseas. In 2006, the company pulled out of Germany and South Korea in the face of stiff competition and poor sales. Still, Wal-Mart has been weathering the economic crisis better than most. The company on May 14 announced it earned $3.02 billion in the three months ended April 30, about equal to the profit it made in the same period in 2008. Revenue fell 0.6% to $93.47 billion from $94.04 billion a year earlier. Highlighting the growing importance of markets such as India, nearly one-fourth of Wal-Mart’s sales for the quarter — 22.7% — came from its international division.