The Hindu Business Line : Wal-Mart is in; partnership pact signed with Bharti

Deal sealed: Mr Rajan Bharti Mittal (left), MD, Bharti Enterprises, and Mr Raj Jain, Country President, Wal-Mart, at a press conference in the Capital on Monday. —

Our Bureau

New Delhi, Aug. 6 Wal-Mart today formally marked its entry into India by signing two agreements with Bharti Enterprises.

The first is a franchisee arrangement between the two companies.

Bharti will handle the front end, while Wal-Mart will take care of the back-end supply chain management and logistics, under the Indian firm’s wholly owned subsidiary, Bharti Retail Ltd.

The second is a 50:50 joint venture agreement for the wholesale cash-and-carry business and back-end supply chain management, under the newly formed Bharti Wal-Mart Pvt Ltd.

“The cash-and-carry operation is a business-to-business proposition that will service small retailers, kirana stores, small restaurants, hotels, farmers, artisans and craftsmen,” said Mr Rajan Bharti Mittal, Joint Managing Director, Bharti Enterprises.

“The venture will, through its back-end supply chain, link small farmers and manufacturers directly with retailers and consumers, thereby maximising value for them.”

The first cash-and-carry outlet will be set up by the end of 2008.

In Tier-II and Tier-III cities, a total of 15 stores each with area of 50,000-2,00,000 sq ft will be rolled out over 5-7 years, initially in the northern part of the country.

A total of 5,000 people will be employed by the venture.

On plans for sourcing from India, Mr Raj Jain, Indian CEO of Wal-Mart, said: “We currently source $600 million worth of goods from small manufacturers and craftsmen in the country. Now our sourcing will increase by several multiples.”

He added: “We will not only look out for new small-scale manufacturers to source for our venture in India, we will also use these manufacturers to export products to other geographies through the Wal-Mart route.”

The firm also intends to help small manufacturers with technical support to upgrade the quality of produced goods.

“We will locally source 90 per cent of the goods, while the rest will be outsourced from countries depending on price points,” said Mr Jain.

Goods such as fruits, vegetables, groceries and staples, footwear, clothing and stationery will be sourced from India.

The retailer plans to source certain consumer durables and electronic items from countries like China.

On special pricing opportunities for Bharti Retail from the cash-and-carry venture, Mr Mittal said: “There will be no preferential treatment for us just because we have an agreement with Wal-Mart.

“Whoever wants to source from the cash-and-carry venture will have to pay similar prices.”

Both companies, however, refused to comment on issues of branding and investments, outlets and private labels, only stating that all options were open.

Going forward, they will decide on whether to use both or either of the company names or a different name altogether.

Emphasising that the partnership would bring “inclusive growth to the country,” Mr Mittal said that they would not hesitate to approach the Government if the need arises for any clearances.

On Wal-Mart’s possible entry into single-brand retail at a later date, Mr Mittal said: “As and when the laws of the land permit, it will only be a natural choice.”