Japanese giant Aeon in stake sale talks with Indian retailers

Japanese retailing and financial services Aeon, which had a revenue of 60 billion U.S. dollars revenue last year, have been approached by at least two leading Indian grocery retail chains with stake sales though foreign direct investment (FDI) in multi-brand retail is yet to get the green signal, an investment banker involved in the deal said Wednesday.

  He said if the Union cabinet could convince the "only thorn West Bengal chief minister Mamata Banerjee, the second largest partner in the ruling United People's Alliance (UPA), the deal of around 120 million U.S. dollars worth of enterprise value in one of the Indian retailing chains will be through. Indian retailing chains, which have the option of divesting stake in the back end, are engaged with Aeon for a stake sale."
Aeon, which has a liaison office in India is carrying out market research but does not have any plans to operate directly in the country. The conglomerate operates in various retail segments from supermarkets, convenience stores, departmental stores, drug stores, supermarkets and financial services. Its main focus is Asia with operations spread over China, Vietnam, South Korea, Indonesia, Thailand, Taiwan, the Philippines and Malaysia and naturally Japan.

The two Indian retail chains, which are negotiating with Aeon, are banking on the giant's expertise in developing a private label range of products. Aeon's private label, TopValu, for various products has been core to its growth across Asian markets.
Majority of the Indian retailers have been trying to capture the domestic market by building their presence in private label goods as that gives them larger profit margins.

With FDI in multi-brand retail in India on the cards, Indian retailers are also have similar talks with other South East Asian companies like the Hong Kong-based retailer A.S. Watson, part of the Hutchison Whampoa Group.
They are basically getting ready to strengthen their back-end operations by roping in global retailing majors to compete when the market suddenly opens up.