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US retail giant Walmart Stores Inc and Bharti Enterprises on Wednesday dissolved their equal joint venture. The global retailer will independently own and operate retail business in the country.
The six-year-old partnership was dogged by various allegations such as breaking foreign direct investment rules and lobbying.
Walmart will acquire Bharti Enterprises’ stake in the wholesale joint venture for an undisclosed amount.
The agreement with Bharti will give Walmart total control over 20 BestPrice Modern shops or the wholesale venture and its supply chain. Bharti Retail will continue to operate the ‘Easyday’ retail stores across all formats, of which there are 212 now.
News of a possible break-up has been doing the rounds, but gathered momentum after recent statements by Bharti Chairman, Sunil Bharti Mittal, and Walmart Asia CEO, Scott Price, that the two were evaluating the joint venture.
As part of the proposed transactions, Bharti will acquire the $100 million compulsory convertible debentures held by Walmart in Cedar Support Services, a company owned and controlled by Bharti.
The agreement is subject to finalisation of definitive agreements and receipt of the requisite regulatory approvals.
India allows 100 per cent FDI in cash-and-carry ventures. Last year, it allowed 51 per cent FDI in multi-brand retail. However, sourcing and investment norms have played spoilsport in attracting foreign funds.
After India announced its rules regarding foreign investment in supermarkets, Walmart sought clarity on aspects of the policy, especially the sourcing clause.
Sourcing norm
In July, it expressed inability to meet the norm requiring it to source 30 per cent goods it sold from small industries, saying it could source only about 20 per cent.
The Bharti-Walmart joint venture opened its first wholesale store in Amritsar in May 2009.
Walmart in a statement said it planned to continue to grow this business while working with the Government and interested stakeholders to create conditions that enable foreign direct investment in multi-brand retail.
Rajan Bharti Mittal, Vice-Chairman and MD, Bharti Enterprises, said, “Bharti is committed to building a world-class retail venture and will continue to invest in Bharti Retail across all formats.”
Scott Price, President and CEO of Walmart Asia, said, “Given the circumstances, our decision to operate independently will be beneficial to both parties.”
Jain, Advisor to Bharti
In a related development, former Walmart India head, Raj Jain, has been appointed as advisor to Bharti Group. Jain was replaced by Ramnik Narsey in June this year.
Sources at Bharti Retail, meanwhile, indicated that Bharti Retail would source from Walmart’s wholesale business but it will not be an exclusive agreement. Additionally, they said that the company will not be closing any Easyday outlet.
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