Best Buy Preps for India Market with Talks of Next Retail Deal

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Best Buy (NYSE:BBY) is in talks to acquire a 51% stake in Next Retail, Videocon Industries’ multi-brand consumer durables retail venture in India. This move by Best Buy comes after the recent announcement by the Indian government allowing overseas companies to own as much as 51% of the retailers selling more than one brand. We believe Next Retail provides Best Buy the right platform to enter the world’s second most populous country. Best Buy competes with general retailers like Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) as well as other specialty retailers like Radio Shack (NYSE:RSH) and GameStop (NYSE:GME).

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India: An Important Market for Future Growth

Next Retail has plans to open 1,000 outlets in India by the end of 2012-13. Its current sales are $251 million and the company is aiming for $348 million in the next year. [1]

In India, the recent approval of a 51% foreign direct investment (FDI) in retail has faced huge opposition from different political parties and small retailers. We believe it will take a while before this could become a reality and retailers like Wal-Mart and Best Buy could enter fully-fledged in India.

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We believe this acquisition, if it materializes, would provide Best Buy a large scale presence in India. It could provide its expertise in operating large scale retail stores to help build Next Retail into a prominent brand in the country.

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Notes:
  1. Videocon to sell 51% in Next Retail to Best Buy, Financial Chronicle []