WalMart would buy out its partner in a wholesale venture in India and end their six-year tie-up, the largest retailer said yesterday, leaving it without a local partner to help set up supermarkets in the country.
Bharti Enterprise’s stake in the wholesale joint venture would be purchased by Walmart, the two companies said, without disclosing the transaction value.
The breakup is a setback to Walmart’s plans to open retail stores in India, Asia’s third-biggest economy. While the US-based company gains full control over 20 wholesale stores and their supply chain, it will be left without an Indian partner, which it would need to set up supermarkets.
Running the business without a local partner was likely to slow Walmart’s growth in India, said Dhvani Bavishi, an analyst at brokerage ICICI Direct in Mumbai.
Walmart “will likely continue to focus only on the wholesale business now”, said Bavishi. “They may start focusing on the retail venture probably after the elections next year.”
Although India allows foreign retailers to fully own wholesale operations, they are required to partner with Indian firms to start retail stores. Walmart has no retail operations in India.
While the nation changed laws in September last year to allow foreign retailers to own majority stakes in multi-brand retail chains, no global retailer has sought such licences yet. Last month the government eased rules covering sourcing, infrastructure investment and store location, in an effort to woo Walmart, Tesco and other global chains to open stores.
The reluctance of overseas companies to invest in retail operations has been a blow to the government of Prime Minister Manmohan Singh, which has battled capital outflows and a plunging currency this year.
In an interview at the weekend, Scott Price, the head of Walmart’s Asia operations, said the company was not talking to other partners and its relationship with Bharti was “very good”.
Walmart declined to comment further yesterday.
The companies each own a 50 percent stake in the venture, according to its website. Now they will probably become competitors.
Bharti planned to open its own chain of wholesale stores, according to two people familiar with the matter, who asked not to be identified. Bharti declined to comment.
Walmart has lost top executives in India over the past year. In June, the chief executive of the India joint venture, Raj Jain, left the company amid government and internal investigations. His departure came seven months after the venture’s chief financial officer was suspended.
Jain would join Bharti Group as an adviser, the company said yesterday.
An Indian government agency was investigating allegations that Walmart violated rules governing foreign investment in the retail industry, Commerce and Industry Minister Anand Sharma said in December last year.
In addition, the company is carrying out an internal investigation on possible violations of US anti-corruption laws in the country. A separate probe into allegations that Walmart lobbied Indian government officials ended without any conclusions, according to a government document. – Adi Narayan Mumbai from Bloomberg