Bentonville-based Wal-Mart Stores Inc. and its retail partner in India, Bharti Enterprises, said Wednesday that they have divvied up their ownership in different types of stores across the country, all but dashing Wal-Mart’s effort to expand its business in Asia’s third-largest economy.
Pending regulatory approval, Wal-Mart will own and operate 20 Best Price Modern Wholesale cash and-carry locations, and Bharti Retail will own and operate 200 or so Easyday discount stores, said Kevin Gardner, senior director of international corporate affairs for Wal-Mart. Together, the retailers now operate all the stores as Bharti Walmart Private Limited.
“Wal-Mart plans to continue to grow this [wholesale] business while working with the government and interested stakeholders to create conditions that enable foreign direct investment in multibrand retail,” Gardner said. He would not place a value on the deal.
Wal-Mart “will likely continue to focus only on the wholesale business now,” Dhvani Bavishi, an analyst at brokerage ICICI Direct in Mumbai told Bloomberg News. “They may start focusing on the retail venture probably after the [Indian] elections next year.”
As of late September, the world’s largest retailer had not applied to open its own stores in India despite a law change in 2012 that now allows foreign retailers to own majority stakes in multibrand retail chains. Retailers may fully own wholesale operations but are required to partner with firms in India to start retail stores.
The agreement also calls for Bharti to acquire compulsory convertible debentures - an unsecured debt that requires conversion to equity at a specific time - held by Wal-Mart in Cedar Support Services, a holding company owned and controlled by Bharti. The Economic Times reported late last month that Wal-Mart had invested $100 million in Cedar in 2010 for the debentures that could be exchanged for 49 percent ownership in Cedar. The conversion deadline had been extended three times, the Times reported.
“Bharti is committed to building a world-class retail venture and will continue to invest in Bharti Retail across all formats,” Rajan Bharti Mittal, vice chairman of Bharti Enterprises, said in a news release from Wal-Mart on Wednesday. Bharti Enterprises, said to be one of India’s leading business groups, has interests in telecommunications, agricultural business, financial services and manufacturing, as well as retail.
“We wish Wal-Mart the very best for the future,” Mittal said.
Scott Price, president and chief executive officer of Walmart Asia, added: “Given the circumstances, our decision to operate independently will be beneficial to both parties.
“Through Wal-Mart’s investment in India - including our cash and carry business, supply chain infrastructure, direct farm program and supplier development - we want to serve India and its people and continue to make important social and environmental contributions to the country.”
Business, Pages 27 on 10/10/2013