JOIN USBharti Enterprises and US retail giant Wal-Mart Stores Inc Wednesday announced they were calling off their much-celebrated six-year-old joint venture to set up franchise stores in India’s retail sector.
Post separation, Wal-Mart will get 100 per cent ownership of the ‘Best Price’ Modern wholesale cash-and-carry business while Bharti Retail will continue to operate the ‘Easyday’ retail stores across all formats.
However, if Wal-Mart wants to set up its own retail stores in India, it will have to do it with another Indian partner who will own 49 per cent of the business under the foreign investment rules.
Both the companies in a joint statement said, they have reached an agreement to independently own and operate separate business formats in India and discontinue their franchise agreement in the retail business.
The joint venture, for wholesale cash and carry and back-end supply chain management operations in India, had a footprint of 212 stores after the joint venture came into being in 2007.
The joint venture also served as back-end support for Bharti Retail, a 100 per cent arm of Bharti Enterprises, that operates under ‘Easyday’ brand.
The discontinuation of the joint venture is subject to finalisation of definitive pacts and receipt of the needed regulatory approvals, the statement said.
As part of the proposed transactions, Bharti will acquire the compulsory convertible debentures held by Wal-Mart in Cedar Support Services, a company owned and controlled by Bharti, the release said.
Shares of Bharti Enterprises’ flagship Bharti Airtel fell on the National Stock Exchange following the news of the break-up with Wal-Mart.
“We believe that with our current footprint of 212 stores, we have a strong platform to significantly grow the business and delight customers. We wish Wal-Mart the very best for the future,” Rajan Bharti Mittal, Vice-Chairman and MD, Bharti Enterprises, was reported as saying by TV channels.
India permitted overseas retailers to own 51 per cent of their India operations in September 2012, but no foreign retailer has evinced interest due to ambiguity around rules governing the policy.
Wal-Mart, which had on earlier occasions said that it was keen on opening as many as eight wholesale stores in 2013, had not opened even one so far this year. Also, Wal-Mart has been under scanner for alleged violation of US anti-bribery laws.
A few months ago, Wal-Mart replaced its India head, Raj Jain, and appointed Ramnik Narsey as interim chief. At Bharti Retail also, Chief Operating Officer Mitch Slape, an old Wal-Mart hand, was sent back to Wal-Mart US recently.
On Wednesday after the split, the Bharti Group roped in Jain as an advisor.