* Wal-Mart to take over existing wholesale business in India
* Wal-Mart will need new local partner to open retail stores
* Wal-Mart can focus on supply chain for eventual retail
By Nandita Bose
MUMBAI, Oct 9 Wal-Mart Stores Inc and
Bharti Enterprises are breaking up their Indian joint venture,
leaving the world's biggest retailer to go it alone in a country
where it has struggled to build a bigger presence.
Bentonville, Arkansas-based Wal-Mart, the world's largest
retailer, will take over its Indian partner's 50 percent stake
in Bharti Wal-Mart Pvt Ltd, which runs 20 wholesale stores under
the Best Price Modern Wholesale brand.
However, if Wal-Mart wants to set up its own retail stores
in Asia's third-largest economy, it will need to find another
local partner to own 49 percent of the business under foreign
investment rules that were eased last year.
Wal-Mart tied up with Bharti in 2007 and had been the most
vocal proponent of prying open India's restrictive retail market
to foreign supermarket operators.
But its growth in India has been hindered by still-evolving
rules on foreign investment, an internal bribery probe, and,
more recently, the faltering partnership with New Delhi-based
Bharti, which Reuters reported in July.
Wal-Mart has not opened a wholesale, or cash-and-carry,
store in India for about a year, despite earlier plans to open
eight in 2013.
"Wal-Mart can now focus on getting its act clean in India
and start afresh," Saloni Nangia, president for retail at
Late last year, the company's Indian joint venture suspended
employees, including the chief financial officer, as part of an
internal investigation into bribery allegations in India and
subsequently brought in a team of lawyers from a U.S. firm to
Focusing on the wholesale business for now will enable
Wal-Mart to build up its supply chain to support future retail
stores, analysts said.
"Wal-Mart can now take over the wholesale business, grow it
at its own pace with the investment it sees fit and it could now
get aggressive in the market," said Devangshu Dutta, who heads
Bangalore-based retail consultancy, Third Eyesight.
For Bharti, which is also the parent company of Bharti
Airtel, India's biggest mobile phone carrier, the
break-up with Wal-Mart means it loses a deep-pocketed partner to
support its retail expansion. Bharti operates the 212-store
easyday chain and said it will continue to invest in and grow
BIG POTENTIAL, BIG CHALLENGE
India last year allowed foreign supermarket companies to own
up to 51 percent of their local operations, but no company has
applied to enter Asia's third-largest economy under the rule.
Despite the vast opportunities - roughly 90 percent of the
$500 billion retail market is done at one-off mom-and-pop shops
- expensive real estate, underdeveloped supply chains and fierce
price competition mean margins are razor-thin and most big
supermarket operators lose money.
Some officials at global retailers have said privately they
are waiting for the outcome of national elections due by May
before applying to operate in India in case the controversial
rule allowing foreign direct investment in supermarkets is
overturned by a new government.
Wal-Mart said on Wednesday it will work with the government
to create conditions that enable foreign direct investment in
the country's supermarket sector.
"Given the circumstances, our decision to operate
independently will be beneficial to both parties," Scott Price,
president and chief executive of Wal-Mart Asia, said in a
statement. "Wal-Mart 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," he said.