Wal-Mart committed to India, despite split with Bharti (updated)

by The City Wire staff ([email protected]) 111 views 

Wal-Mart told The City Wire it remains committed to India and the market and does plan to grow its cash and carry business after the split with its venture partner Bharti is completed.

News of the partner split spread rapidly overnight as the retailer confirmed it had reached an agreement to independently own and operate separate business formats in India and discontinue a franchise agreement with Bharti. The agreement is subject to finalization of definitive agreements and receipt of the requisite regulatory approvals, the company noted in the release.

"Given the circumstances, our decision to operate independently will be beneficial to both parties," Scott Price, president and chief executive of Walmart Asia, said in the statement.

Wal-Mart said it will acquire Bharti’s stake in Bharti Walmart Private Limited, a joint venture between the retailers, giving Walmart 100% ownership of the Best Price Modern Wholesale cash and carry business.

Kevin Gardner, Walmart spokesman, said Wal-Mart plans to grow the business while working with government and interested stakeholders to create conditions that enable foreign direct investment in multi- brand retail.

As part of the proposed transactions, Bharti will acquire the Compulsory Convertible Debentures (CCDs) held by Walmart in Cedar Support Services, a company owned and controlled by Bharti. Bharti Retail will continue to operate “Easyday” retail stores across all formats and invest in and grow the business.

Wal-Mart said it sees great potential to build upon the successes already seen in its wholesale cash and carry business in India as well as future retail investment opportunities that may be possible through the Foreign Direct Investment policy.

Multiple news reports out of India have hinted for weeks that something was up between the two retail partners as Bharti had returned more than two dozen properties back to landlords, which were leased throughout the country.

India last year allowed foreign supermarket companies to own up to 51% of their local operations, but no company has applied to enter the country under the rule.

Wal-Mart’s business dealings in India have been under scrutiny with several suspensions in Bharti Walmart leadership and the resignation of CEO Raj Jain in June. Jain had overseen the Indian market since 2007. 

In August, Wal-Mart transferred its chief operating officer for Bharti back to the U.S., after one year running that local business.

Wal-Mart said recently its investments in India will also include supply chain infrastructure as well as its direct farm and supplier development programs that not only will serve customers but also make important social and environmental contributions to the country.

“We think India’s best days are ahead, and we are excited to be a part of this opportunity. Modern retailers worldwide bring about large-scale, high volume sourcing, coupled with a strong technological edge and supply chain efficiencies. These have a direct positive impact on consumers who benefit by getting a wide assortment of quality goods at low prices,” the Wal-Mart spokesman added.

The last two stores opened by Bharti Walmart was in October 2012 and the retailer appeared to be expanding its reach, albeit at a cautious pace.

In July, sources out of Bentonville said it would likely be 2015 before Wal-Mart ramped up its expansion in India.

Wal-Mart reportedly cooled its heels as news of an investigation into the legality of the $100 million Bharti Walmart transaction years ago came to surface earlier this summer.

In response to those that probe, Wal-Mart said it appreciates the continued efforts by the Indian Government to clarify investment conditions because the policy reform is expected to improve shopping options for customers, provide new markets for local suppliers and improve the supply chain infrastructure throughout the country.