The Hindu Business Line : RPG, Dairy Farm likely to part ways

THE RPG group, promoter of the FoodWorld chain of supermarkets, and its international joint venture partner, Dairy Farm International (DFI), are likely to part ways soon, according to informed sources in the RPG group.

Both the partners, said this source, have decided to part ways "as friends" and executives on both sides are working towards an amicable solution. An official announcement could be expected in the next four to six weeks, said this source.

Asked to comment on this development and on media reports that the Tatas along with the Jardine Matheson group, which owns DFI, are interested in buying out the RPG stake in FoodWorld, Mr Sanjiv Goenka, Vice-Chairman, RPG Enterprises, told Business Line in Kolkata: "It's not our group policy to comment on speculation."

While the RPG group owns a 51 per cent stake in FoodWorld Supermarkets Ltd, Dairy Farm owns the remaining 49 per cent stake. Both the partners have been infusing funds in the proportion of their stakes in the past few years. In September 2002, the two partners invested Rs 10 crore in the equity of FSL, taking its equity to Rs 64 crore. They then invested Rs 8 crore more in December 2002 and a further Rs 6 crore in May 2003, taking the total equity to Rs 78 crore.

At present, FoodWorld operates 96 stores in southern India and in Pune. Dairy Farm also has a 50 per cent stake in RPG Guardian, which owns the beauty and wellness chain, Health & Glow.

RPG Group sources say that there have been several "issues" with DFI over control of the joint venture. Also, DFI, add these sources, had raised the issue of conflict of interest with FoodWorld when the RPG group floated the hypermarket chain, Giant, now renamed Spencer's.

These sources indicated that a methodology is being worked out to carve up the two companies between the two joint venture partners and when they part ways, DFI would need an Indian partner as existing laws do not allow foreign direct investment in retail. DFI's investment in FoodWorld, which was floated in 1996, came in before the rules later disallowed FDI in retail.

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