Tesco enters India with cash-and-carry

By Mark Potter and Rina Chandran

LONDON/MUMBAI (Reuters) - Tesco (TSCO.L), the world's No.3 retailer, plans to set up shop in India with a wholesale cash-and-carry business and a deal to help Indian conglomerate Tata Group grow its hypermarket business.

The long-awaited move into the world's second most populous country is the latest expansion by Tesco as it looks for new profit streams beyond its dominance of the British grocery market. Last year it opened stores in the United States and last month it announced a big push into banking.

It also mirrors a move by U.S. rival Wal-Mart (WMT.N), which has teamed up with India's Bharti Enterprises, as the world's top store groups seek a foothold in India's $350 billion retail industry, amid forecasts it could double in size by 2015.

Foreign multi-brand retailers are currently limited to wholesale or licence and franchise arrangements in India.

Tesco International and IT Director Philip Clarke told reporters on Tuesday that the firm was keen to set up its own retail business in India, should the legislation change.

"If and when it changes, our wholesale business and the agreement with the Tata Group gives us great experience of the Indian marketplace and consumer," he said on a conference call.

BlueOar analyst Greg Lawless welcomed the move.

"It's a sensible deal. They're not betting the farm on it," he said. "It gets them entry into the market and that's what it's all about. But it's a very, very long term one."