Wal-Mart, Indian firm in deal
new delhi -- Wal-Mart Stores Inc. and India’s Bharti Enterprises signed a deal Monday to jointly build wholesale facilities that will buy goods from farmers and small manufacturers and sell to retailers through a nationwide supply chain.
The deal may help the U.S. company gain a foothold in India’s booming but much protected retail business, which is dominated by an estimated 12 million mom-and-pop shops.
Indian laws do not allow multi-brand foreign retailers to sell directly to consumers, but they can run wholesale operations and provide back-end support to Indian retailers. Indian companies are also allowed to operate stores selling foreign brands under franchise from their producers.
Bentonville, Ark.-based Wal-Mart and Bharti Enterprises appeared to have worked around those rules, hoping to get the U.S. retail giant an entry into the massive Indian market.
The companies signed two agreements, which Bharti’s managing director, Rajan B. Mittal, said conform to existing rules.
Under the first agreement, the two companies will set up “a 50-50 venture for wholesale cash-and-carry and back-end supply chain management operation in India,” a joint statement said.
The joint venture “will help drive efficiencies across the supply chain and work toward the betterment of India’s farmers, manufacturers and retailers,” the statement quoted Wal-Mart Vice Chairman Mike Duke as saying.
Wal-Mart currently imports about $600 million worth of goods from India, a fraction of what its buys from China for its stores worldwide.
A separate franchise agreement signed Monday would allow Wal-Mart to share its technology and expertise for a chain of retail stores that Bharti plans to build through its fully owned subsidiary -- Bharti Retail Ltd. It is not clear whether Bharti’s retail would also be able to display the Wal-Mart brand.
The deal faces political opposition and scrutiny from the government.
Wal-Mart is not the only company eyeing India’s retail market, estimated to be worth more than $250 billion and is growing at a 20% rate every year.
Retailers such as Carrefour of France, Tesco of Britain and Metro of Germany have lobbied the Indian government to liberalize retail trade. Opposition from the left has, however, prevented the government from allowing foreign retailers to open their own stores here.
If cleared, the deal with Bharti would mark Wal-Mart’s first entry into a large country in a decade -- the last one was China, said Raj Jain, head of Wal-Mart’s India operations.
The first wholesale cash-and-carry facility is targeted to open by the end of next year. Over the next seven years, the venture is expected to open 10 to 15 such facilities and employ about 5,000 people.
