Aditya Birla Group joins the retail race, on its own

The fun has begun in retail. The stakes are getting bigger by the day with the Wal-Mart name causing ripples in some of the biggest Indian business houses.

It was clear that Aditya Birla Group is going for the retail business from the news which came before. The recent news regarding the Group’s entry into the retail can be seen as an impact of the joint venture between the Bharti and Wal-Mart to enter in to retail. The Birla camp may be thinking of increasing the speed of the work.

Till now four established groups have shown their interest in the retail sector of India. Among them Reliance has already opened its retail store in Hyderabad as pilot testing. That store is mainly focusing on the vegetable and fruits with the retail named as Reliance Fresh. Tata is focusing on Consumer Durables. As these two big corporate have already begun their process to open pan-India store, Aditya Birla has to speed up its work so that it should lag behind in the business.

The Rs. 40,000 Aditya Birla Group is in the business ranging from metals to BPO has good knowledge of Indian consumers. It is being expected that the group will invest Rs. 5000 crore to Rs. 6000 crore at the initial phase. For financing the project it may use the Birla TMT Holdings (an unlisted company) source and debt. Birla TMT has raised around $980 million through the sale of 33% equity stake in Idea Cellular. It shows that the group will not face problems in financing its venture.

The company is planning to enter into the second tier city at the initial phase. It has to be noted that Wal-Mart started its business with the same strategy. One reason for this is that while other players will fight for the market share in Metros it can easily expand and make its base strong in the second tier cities.

Wal-Mart was not able to capture the market in South Korea and many other countries where the local retail players has strong market base. It was because Wal-Mart has a late entry into those markets. Wal-Mart will not miss the chance in India. The $300 billion company wants a strong market in Indian retail sector whose market size is $330. When there is a huge opportunity for Wal-Mart, the local players like Reliance, Aditya Birla Group and Tata are determined to give a tough fight to Wal-Mart.