Wal-Mart Stores is to buy out Indian venture partner Bharti Enterprises, ending the speculation over the future of the business.
The two companies, which operate 20 wholesale stores in India, will now own and operate separate businesses in India, a joint statement said today (9 October).
Under the agreement, Wal-Mart will acquire Bharti’s interest in the venture, and will own all of their existing Best Price Modern Wholesale cash-and-carry business.
Wal-Mart said it intends to grow the business, while working with the Indian government to create “conditions that enable foreign direct investment in multi-brand retail”.
Bharti, meanwhile, will continue to operate its Easyday retail stores across all formats, for which Wal-Mart has provided supply chain and management support.
The announcement comes after mounting speculation and amid the changing face of India’s retail sector. India’s regulations governing foreign direct investment in the industry were eased last year, giving overseas companies the chance to own and run consumer-facing multi-brand retail outlets.
Last September, India brought in measures to allow foreign retailers to own 51% of multi-brand retail outlets. Wal-Mart welcomed the move and it has been reported its venture with Bharti has not opened any more stores for months.
“Given the circumstances, our decision to operate independently will be beneficial to both parties,” Scott Price, president and CEO of Wal-Mart’s operations in Asia, said.
“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.
“Walmart 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. We wish Bharti well as they grow their retail business.”
Despite the reforms, no multinational food retailer has decided to set up multi-brand outlets in the country. In August, India moved to ease conditions it had placed on the new rules governing overseas investments.
Rajan Bharti Mittal, vice chairman and managing director of Bharti Enterprises, said the conglomerate was committed to the retail sector.
“Bharti is committed to building a world-class retail venture and will continue to invest in Bharti Retail across all formats. We believe that with our current footprint of 212 stores, we have a strong platform to significantly grow the business and delight customers.”
The agreement is subject to finalisation of definitive agreements and receipt of the requisite regulatory approvals.