Bharti, Wal-Mart go separate ways:

  

 

New Delhi: Bharti Enterprises Ltd and Wal-Mart Stores Inc. have called off their Indian joint venture Bharti Wal-Mart, bringing to end the troubled saga of the company that runs wholesale (or cash-and-carry) stores called Best Price Modern across India.

The break-up has been in the air, especially after recent statements by Bharti chairman Sunil Bharti Mittal and Wal-Mart Asia CEO Scott Price, that the two partners were evaluating the joint venture.

Wal-Mart will acquire Bharti’s 50% stake in the joint venture, giving the US retailer 100% holding in the Best Price Modern stores.

Bharti will, for its part, acquire the debentures held by Wal-Mart in Cedar Support Services, the holding company of Bharti Retail Ltd that runs the Easyday chain of retail stores. The debentures were sold, and indirect control and management ceded to Wal-Mart by the Indian company at a time when foreign direct investment (FDI) wasn’t allowed in supermarkets (or so-called multi-brand retail). 

 

 

Wal-Mart said in a statement that it would continue to work with the government to create “conditions that enable FDI in multi-brand retail”. India does allow this, but with conditions that many foreign retailers, including Wal-Mart, find unpalatable.

Rajan Bharti Mittal, vice-chairman and MD, Bharti Enterprises, said: “Bharti is committed to building a world-class retail venture and will continue to invest in Bharti Retail across all formats. We believe that with our current footprint of 212 stores, we have a strong platform to significantly grow the business and delight customers. We wish Walmart the very best for the future.”

 

Scott Price, president and CEO, Walmart Asia, said: “Given the circumstances, our decision to operate independently will be beneficial to both parties. Through Walmart’s investment in India, including our cash and carry business, supply chain infrastructure, direct farm programme and supplier development, we want to serve India and its people, and continue to make important social and environmental contributions to the country. Walmart is committed to businesses that serve our members and provide good returns for our shareholders, and we will continue to advocate for investment conditions that allow FDI multi-brand retail in India. We wish Bharti well as they grow their retail business.”

 

 

Bharti to decide on future of Wal-Mart tie-up this month:

Sunil Mittal said, confirming the worst-kept secret in Indian business—that the two companies are reviewing their relationship after the US retailer ran into trouble with regulators in India, and that they may break up.

“Within October, I would say, Wal-Mart should have taken a decision of their vision for India, and Bharti could have taken a decision whether it matches our aspirations,” Mittal said on the sidelines of the 2nd India-Africa Business Council (IABC) meeting in Johannesburg.

Bharti has a 50:50 joint venture with Wal-Mart for so-called cash-and-carry stores (or wholesale stores), and the US firm has also been managing Bharti’s retail chain Easy Day.

Formed in 2007, Bharti Walmart Pvt. Ltd runs 19 Best Price Modern Wholesale stores in cities such as Amritsar, Jalandhar, Kota, Bhopal, Ludhiana, Raipur, Vijayawada, Agra, Meerut, Lucknow, Jammu, Guntur, Aurangabad, Amravati, Hyderabad and Rajahmundry. At the time, Bharti said it would also leverage learnings from Wal-Mart to run its own retail stores.

 

Shortly after its launch, the Wal-Mart team in India also started running Easy Day, although at the time Indian laws didn’t allow foreign investment in so-called multi-brand retail or supermarkets. It was only in September last year that the government allowed foreign supermarket chains to hold a stake of up to 51% in multi-brand retail.

“We are awaiting Wal-Mart’s final response to Indian retail and then we will evaluate our options,” Mittal said.

On 9 September, the Hindustan Times newspaper reported that Wal-Mart is exploring pulling out of its joint venture with Bharti.

According to a person familiar with the matter who spoke on the condition of anonymity because of a commercial relationship with Wal-Mart in India, the US company is down-sizing its operations in as well as its aspirations for India, once seen as the next big frontier for modern or organized retail.

“We’ve made no announcements and don’t comment on rumours or speculation .

Bharti has a 50:50 joint venture with Wal-Mart for so-called cash-and-carry stores (or wholesale stores), and the US firm has also been managing Bharti’s retail chain Easy Day.

 

 

 

Formed in 2007, Bharti Walmart Pvt. Ltd runs 19 Best Price Modern Wholesale stores in cities such as Amritsar, Jalandhar, Kota, Bhopal, Ludhiana, Raipur, Vijayawada, Agra, Meerut, Lucknow, Jammu, Guntur, Aurangabad, Amravati, Hyderabad and Rajahmundry. At the time, Bharti said it would also leverage learnings from Wal-Mart to run its own retail stores.

Shortly after its launch, the Wal-Mart team in India also started running Easy Day, although at the time Indian laws didn’t allow foreign investment in so-called multi-brand retail or supermarkets. It was only in September last year that the government allowed foreign supermarket chains to hold a stake of up to 51% in multi-brand retail.

 

 

“We are awaiting Wal-Mart’s final response to Indian retail and then we will evaluate our options,” Mittal said.

On 9 September, the Hindustan Times newspaper reported that Wal-Mart is exploring pulling out of its joint venture with Bharti.

According to a person familiar with the matter who spoke on the condition of anonymity because of a commercial relationship with Wal-Mart in India, the US company is down-sizing its operations in as well as its aspirations for India, once seen as the next big frontier for modern or organized retail.

“We’ve made no announcements and don’t comment on rumours or speculation,” said a Wal-Mart spokesperson.

 Wal-Mart is optimistic about growing our Best Price Wholesale cash-and-carry business in India, as well as future retail investment opportunities that can be made possible through a clear and predictable FDI (foreign direct investment) policy.”

Wal-Mart invested $100 million in the holding company of Bharti’s retail operations around the same time as it formed the joint venture.

Indian law at the time wasn’t explicit on whether such investments in holding companies, especially if made through convertible debentures, amounted to foreign direct investment in subsidiaries.

 

After some politicians, likely fed the information by Bharti’s corporate rivals, raised this, India’s commerce ministry and the Reserve Bank of India bounced the contentious issue around before passing it on to the Enforcement Directorate, which looks at foreign exchange violations. Both Bharti and Wal-Mart have maintained that their investments were legal at the time they were made.

By the time India got around to allowing 51% FDI in multi-brand retail, Wal-Mart had run into more trouble.

 

 Gauri Kesarwani.

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