Carrefour, number two behind US retail giant Wal-Mart, added in the statement it had been “discussing partnerships” with some Indian companies, but that it did not wish to divulge names. The company has been scouting for years for Indian partners. Retail tycoon Kishore Biyani has often been mentioned and Carrefour and his Future Group were linked most recently in an Indian media report in January. India’s estimated $500-billion retail sector is seen as having high growth potential but it remains tightly regulated with large retailers accounting for around 6% of industry sales.

Carrefour had previously said it planned to have an Indian franchisee which would open branded hypermarkets in the country. It had said Carrefour’s 100%-owned cash-and-carry business would supply these stores. Under India’s tight foreign investment rules, no foreign chains are permitted in the retail sector – except for single-brand outlets such as Nokia or Reebok – to protect local retail players.

Foreign groups can only be wholesalers and must partner with domestic companies to enter the retail market. Last year, Wal-Mart opened its first sales venture in India, teaming up with Bharti Enterprises, parent of India’s biggest mobile firm Bharti Airtel, in a wholesale joint venture called Best Price Modern Wholesale.

Carrefour’s announcement came as the retailer reported separately that net profit tumbled in 2009 by 74.2% $505 million dollars, hit by huge restructuring charges.

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“Carrefour and some Indian companies have been discussing partnerships but we do not want to comment on any of the company we have been talking to,” Carrefour said in a emailed statement to Reuters late on Thursday. Indian media has speculated on a tie-up between Pantaloon and Carrefour to launch franchise stores in India. Earlier this week, Future Group Chief Executive Kishore Biyani told Reuters that his company was in talks with several overseas retailers but declined to specify whether Carrefour was one of them.

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The Paris-based retailer, which is seeing revenues in its home country falling due to a tightening of spending by consumers, is expected to sign on the dotted line by March, said an executive familiar with the development.

When the deal with India’s retail king Biyani is formally announced, Carrefour would be the third among the big names entering the $390-billion Indian retail market after the Beast of Bentonville, Wal-Mart, and UK’s Tesco.

Carrefour, Wal-Mart and other big retailers from the developed world are keen to have a presence in India despite regulatory obstacles, hoping that the laws would be eased as it happened in the telecom and other sectors. Also, the cleaning up of excesses in the industry, after the exuberance of the past decade, is giving hopes of a more saner approach to business. In the last downturn, many retailers, including Reliance Retail, the AV Birla group’s More, which went on a spree in setting up outlets had to shutter many of them and a prominent name, Subhiksha, went bust. The losses continue for many, though it has slowed.

The Carrefour franchisee is likely to be a part of the Future Value Retail, a 100% unit of Pantaloon Retail, which owns hypermarket chains Big Bazaar and Food Bazaar. The Big Bazaar, which has 109 stores, contributes 65% of the Future Group’s $2-billion total revenues. Food Bazaar, a supermarket chain has 152 stores.

Carrefour has two entities in India – Carrefour WC & C India and Carrefour India Master Franchise Company.

Although the franchisee stores may be dealing with similar products as some of Mr Biyani’s existing outlets, it would serve the affluent upper middle-income and rich customers who don’t look for economy or hesitate to pay more for the experience of shopping in a luxurious atmosphere.

This would pit the Carrefour-Biyani combination against the Raheja group’s HyperCity that sells expensive products such as imported wine and whiskey.

Thierry Garnier, executive director in charge of international partnerships at Carrefour, is leading the negotiation with Kishore Biyani’s son and Future Group director Rakesh Biyani, the official said. Sameer Sain, CEO of Future Capital Holdings and a former Goldman Sachs banker, is helping Biyanis close the deal.

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