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Wal-Mart says retail plans with Bharti 'not tenable'

Indonesia, Oct 6, 2013, Reuters:
A customer shops at a Best Price Modern Wholesale store, a joint venture of Wal-Mart Stores Inc and Bharti Enterprises, at Zirakpur in Punjab. Reuters
Wal-Mart Stores Inc's retail plans with India partner Bharti Enterprises are "not tenable" and both sides are looking for the best way to move forward, an executive with the U.S. retailer told Reuters.

Wal-Mart was expected to make a decision on its Indian retail plans later this month and Bharti will accordingly decide if those plans match its overall retail ambitions.

"We created a franchise in retail with Bharti in the hopes that there could be a potential freeing up (of foreign direct investment) that would allow it to potentially be the base of the business. But frankly, the FDI has passed," said Wal-Mart Asia Chief Executive Scott Price on the sidelines of the APEC conference in Bali, Indonesia

"That means the existing franchise to Bharti is not tenable as the base. What we are talking about with Bharti is what we do with that business."

Wal-Mart has an equal joint venture with Bharti under which it runs its Best Price Modern Wholesale Stores in India and the U.S. retailer last year called Bharti its "natural partner" to open its retail stores in the country.

In July, Reuters reported Bharti was looking to exit its joint venture with Wal-Mart.

India permitted foreign retailers to own 51 percent of their Indian operations in September 2012, but ambiguity around rules governing the policy has ensured no foreign retailer has so far applied to enter the country.

"I don't see how any foreign retailer can comply and quite honestly no domestic retailer is complying either," Price said.

The biggest stumbling block for companies has been the government's requirement that 30 percent of their products be sourced locally.

Despite the uncertainty over the retail business, Price said the world's largest retailer was not planning on leaving India and was actually hoping to expand its wholesale business.

"We are committed to India and we are not thinking of leaving India anytime soon," he said.

Price also said Wal-Mart had no immediate acquisition plans in China but was keeping its eyes open for opportunities.

The U.S. retailer also had no plans for expansion into Thailand or Indonesia, two countries where supermarkets have faced tough competition from local mini-markets.

 

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