Tesco, Britain's largest supermarket chain, is making its first foray into the Indian retail market with plans to build a wholesale cash-and-carry business as well as signing a deal with India’s Tata Group to develop its hypermarket business.

The UK company will invest £60 million over the next two years and open its first site in Mumbai by the end of 2009. Tesco intends to open at least three large "hubs" in Mumbai, Delhi and Bangalore, with several smaller sites in the surrounding areas.

The cash-and-carry outlets, which will source most of their products from India, will sell to small Indian retailers, restaurants, stores and other business owners.

Tesco will also work with Trent, the retail arm owned by Tata Group, to develop its Star Bazaar hypermarkets.

Under the terms of the deal with Trent, Tesco will receive a fee for helping to expand Star Bazaar from its current four stores to a planned 50 hypermarkets over the next five years.

Tesco admitted today said it was also interested in launching a consumer retail offering in India, although current Indian rules on foreign investment prevent it from opening stores at present.

Under the rules, multi-brand retailers, such as Tesco and Wal-Mart, may only operate cash-and-carry businesses, although single-brand retailers, such as Marks & Spencer, are allowed to own 51 per cent of a retail joint venture in the country.

Tesco employs nearly 3,000 Indian staff at its Hindustan service centre in Bangalore, providing IT, financial and business services to Tesco Group.

Tesco also sources more than £170 million worth of Indian products each year and has offices in Delhi, Bangalore and Tirupur.

The Indian launch follows Tesco’s expansion into the US last October with its Fresh & Easy stores.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts