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Bharti, Wal-Mart end joint venture
NEW DELHI: Bharti Enterprises and Wal-Mart Stores have finally downed the shutters on one of the most ambitious joint ventures in the country. The two companies announced that they are breaking off their seven-year-old alliance to pursue their retail dreams independently.
The two had a 50:50 partnership to run the wholesale cash-and-carry business that sells to hotels, canteens and kirana stores. Besides, they collaborated on real estate consulting work through Cedar Support Services to identify store locations. Bharti separately ran a multi-brand retail chain, named Easy Day, that now has over 200 stores.
Wal-Mart blamed the government's foreign investment regime for the change in strategy. "Bharti and Wal-Mart's mutual decision to independently own and operate separate business formats in India is based on external and internal factors, including the new FDI policy. Under the requirements contained in the new FDI policy Wal-Mart could not invest in multi-brand retail through the existing Bharti retail business," a spokesperson said in response to a TOI questionnaire.
NEW DELHI: Bharti Enterprises and Wal-Mart Stores have finally downed the shutters on one of the most ambitious joint ventures in the country. The two companies announced that they are breaking off their seven-year-old alliance to pursue their retail dreams independently.
The two had a 50:50 partnership to run the wholesale cash-and-carry business that sells to hotels, canteens and kirana stores. Besides, they collaborated on real estate consulting work through Cedar Support Services to identify store locations. Bharti separately ran a multi-brand retail chain, named Easy Day, that now has over 200 stores.
Wal-Mart blamed the government's foreign investment regime for the change in strategy. "Bharti and Wal-Mart's mutual decision to independently own and operate separate business formats in India is based on external and internal factors, including the new FDI policy. Under the requirements contained in the new FDI policy Wal-Mart could not invest in multi-brand retail through the existing Bharti retail business," a spokesperson said in response to a TOI questionnaire.
Government officials said that the retailer was not comfortable with the requirement of sourcing 30% of the goods from domestic companies. Besides, it had thought of using its wholesale business network while setting up a joint venture with Bharti to meet the prescription of mandatory investment in back-end infrastructure. But the government did not permit either. "There is a policy in place and we cannot tailor it to meet the requirements of individual companies," said a senior government official, while ruling out any change in stance.
Market players are already discussing the possibility of Wal-Mart tying up with Reliance Retail, which is part of Mukesh Ambani's business empire. When asked, a Wal-Mart spokesperson said: "We continue to review the guidelines and work with the government and interested stakeholders to create conditions that enable foreign direct investment in multi-brand retail."
Wal-Mart Stores, which was one of the strongest advocates for the softening up of the country's stringent FDI policies for foreign retailers, will need to find a local partner to own 49% of business under current FDI regulations to set up multi-brand outlets. Despite announcing plans to open eight stores in 2013, the retailer has not opened a single one here for about a year.
Tuesday's announcement that will leave the world's largest retailer stranded without an ally in Asia's third largest economy will subsequently see the Bentonville, Arkansas-based company acquire Bharti's stake in Bharti Walmart Pvt Ltd, giving it 100% ownership of the Best Price Modern cash-and-carry business.
As part of the proposed transactions, Bharti will acquire the controversial $100 million debentures held by Wal-Mart in Cedar, a company owned and controlled by Bharti. Following allegations of violation of Foreign Exchange Management Act, the enforcement directorate is investigating the investment in Cedar by Wal-Mart.
Market players are already discussing the possibility of Wal-Mart tying up with Reliance Retail, which is part of Mukesh Ambani's business empire. When asked, a Wal-Mart spokesperson said: "We continue to review the guidelines and work with the government and interested stakeholders to create conditions that enable foreign direct investment in multi-brand retail."
Wal-Mart Stores, which was one of the strongest advocates for the softening up of the country's stringent FDI policies for foreign retailers, will need to find a local partner to own 49% of business under current FDI regulations to set up multi-brand outlets. Despite announcing plans to open eight stores in 2013, the retailer has not opened a single one here for about a year.
Tuesday's announcement that will leave the world's largest retailer stranded without an ally in Asia's third largest economy will subsequently see the Bentonville, Arkansas-based company acquire Bharti's stake in Bharti Walmart Pvt Ltd, giving it 100% ownership of the Best Price Modern cash-and-carry business.
As part of the proposed transactions, Bharti will acquire the controversial $100 million debentures held by Wal-Mart in Cedar, a company owned and controlled by Bharti. Following allegations of violation of Foreign Exchange Management Act, the enforcement directorate is investigating the investment in Cedar by Wal-Mart.
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