Wal-Mart, Bharti Enterprises call off India joint venture

By Nandita Bose

MUMBAI (Reuters) - Wal-Mart Stores Inc and Bharti Enterprises are breaking up their Indian joint venture, leaving the world's biggest retailer to go it alone in a country where it has struggled to build a bigger presence.

Bentonville, Arkansas-based Wal-Mart, the world's largest retailer, will take over its Indian partner's 50 percent stake in Bharti Wal-Mart Pvt Ltd, which runs 20 wholesale stores under the Best Price Modern Wholesale brand.

However, if Wal-Mart wants to set up its own retail stores in Asia's third-largest economy, it will need to find another local partner to own 49 percent of the business under foreign investment rules that were eased last year.

Wal-Mart tied up with Bharti in 2007 and had been the most vocal proponent of prying open India's restrictive retail market to foreign supermarket operators.

But its growth in India has been hindered by still-evolving rules on foreign investment, an internal bribery probe, and, more recently, the faltering partnership with New Delhi-based Bharti, which Reuters reported in July.

Wal-Mart has not opened a wholesale, or cash-and-carry, store in India for about a year, despite earlier plans to open eight in 2013.

"Wal-Mart can now focus on getting its act clean in India and start afresh," Saloni Nangia, president for retail at Technopak Consultants.

Late last year, the company's Indian joint venture suspended employees, including the chief financial officer, as part of an internal investigation into bribery allegations in India and subsequently brought in a team of lawyers from a U.S. firm to strengthen compliance.

Focusing on the wholesale business for now will enable Wal-Mart to build up its supply chain to support future retail stores, analysts said.

"Wal-Mart can now take over the wholesale business, grow it at its own pace with the investment it sees fit and it could now get aggressive in the market," said Devangshu Dutta, who heads Bangalore-based retail consultancy, Third Eyesight.

For Bharti, which is also the parent company of Bharti Airtel , India's biggest mobile phone carrier, the break-up with Wal-Mart means it loses a deep-pocketed partner to support its retail expansion. Bharti operates the 212-store easyday chain and said it will continue to invest in and grow the business.

BIG POTENTIAL, BIG CHALLENGE

India last year allowed foreign supermarket companies to own up to 51 percent of their local operations, but no company has applied to enter Asia's third-largest economy under the rule.

Despite the vast opportunities - roughly 90 percent of the $500 billion retail market is done at one-off mom-and-pop shops - expensive real estate, underdeveloped supply chains and fierce price competition mean margins are razor-thin and most big supermarket operators lose money.

Some officials at global retailers have said privately they are waiting for the outcome of national elections due by May before applying to operate in India in case the controversial rule allowing foreign direct investment in supermarkets is overturned by a new government.

Wal-Mart said on Wednesday it will work with the government to create conditions that enable foreign direct investment in the country's supermarket sector.

"Given the circumstances, our decision to operate independently will be beneficial to both parties," Scott Price, president and chief executive of Wal-Mart Asia, said in a statement. "Wal-Mart 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," he said.

(Editing by Tony Munroe and Matt Driskill)

Matches

MORE TOP STORIES TODAY

Punjab pull off another big chase

Punjab pull off another big chase

GAME 7, SHARJAH—Maxwell, Miller, Pujara chase down Rajasthan's 192. More »

Royal test for Kings

Royal test for Kings

Preview — Clash of philosophies between Australia-centric teams More »

Have nothing to prove to anybody — Sehwag

Have nothing to prove to anybody — Sehwag

The Nawab of Najafgarh says a good run in IPL could help his chances of a comeback on India's tour to England in June. More »

Shastri in proposed IPL probe panel

Shastri in proposed IPL probe panel

Some members stressed on the need for proposing names with an "impeccable record and clean image". More »

Duminy steals first win for Delhi

Duminy steals first win for Delhi

Furious fifties by Duminy and Dinesh Karthik end a long losing streak for the Daredevils. More »

Five things England must do to bounce back

Five things England must do to bounce back

England have appointed a new head coach in Peter Moores. More »

AB, Parthiv seal Bangalore's second win

AB, Parthiv seal Bangalore's second win

Royal Challengers overcame a stutter to cruise to the small target they were set by Mumbai Indians. More »

‘Felt like helpless minority’

‘Felt like helpless minority’

Former BCCI treasurer Ajay Shirke says emotions got the better of Srinivasan and he tried to oversimplify things by calling Meiyappan an “enthusiast.” More »

Srinivasan can attend BCCI meeting

Srinivasan can attend BCCI meeting

His status as president of TNCA makes him eligible to attend the Working Committee meeting on Sunday. More »

No way back for Pietersen: ECB

No way back for Pietersen: ECB

Kevin Pietersen's hopes of reviving his international career appeared to end Saturday when ECB managing director Paul Downton said there was 'no way back'… More »

The world record that nearly wasn't

The world record that nearly wasn't

Twenty years ago this week, Brian Lara became Test cricket's highest scorer, but he almost didn't make it. More »

Maxwell carves his parallel universe

Maxwell carves his parallel universe

Glenn Maxwell seems to project an icy disdain when at the crease. Match situations rarely faze him and the bubble in which he plays excludes everyone … More »

Moores gets second stint as coach

Moores gets second stint as coach

In a two-year spell from 2007 to 2009, the 51-year-old Moores led England in seven Test series. More »

Bangladesh senior players to see shrink

Bangladesh senior players to see shrink

Bangladesh's senior players will have three sessions with a psychological skill development coach later this month More »

BCCI is not anybody’s property — Dalmiya

BCCI is not anybody’s property — Dalmiya

Dalmiya feels that Srinivasan’s ‘power hungry’ attitude isn’t helping matters. More »

Tough for bowlers: Saeed Ajmal

Tough for bowlers: Saeed Ajmal

The 36-year-old believes the T20 format and rule changes in 50-over matches have made a real difference. More »

KP ridicules idea of day-night Tests

KP ridicules idea of day-night Tests

Kevin Pietersen has ridiculed the idea of day-night Test cricket, saying the game would be so different to proper Test cricket that we will need a whole… More »

Rajasthan edge low-scoring thriller

Rajasthan edge low-scoring thriller

The bowlers restricted Hyderabad to 133 for 6 before Rahane and Binny took Rajasthan over the line. More »

Maxwell blitz takes Punjab home

Maxwell blitz takes Punjab home

The Kings XI batsman blasted a 43-ball 95 to help his team pull off a massive chase against Chennai Super Kings. More »

BCCI members want independent probe

BCCI members want independent probe

The board members are realising after the Supreme Court's observations that something has to be done — IS Bindra More »

'BCCI lacks leaders to take on Srini'

'BCCI lacks leaders to take on Srini'

Two former BCCI presidents, Shashank Manohar and Jagmohan Dalmiya, have reacted strongly to the news of the BCCI calling an emergent meeting on Sunday… More »

Delhi look for first points against confident Kolkata

Delhi look for first points against confident Kolkata

Preview — The threat of Sunil Narine looms large again. More »

Bangalore vs Mumbai: A battle of the big-hitters

Bangalore vs Mumbai: A battle of the big-hitters

Preview — Given the firepower in both line-ups, Dubai crowd may see another high-scorer More »

Yuvraj tees off to Sharjah's delight

Yuvraj tees off to Sharjah's delight

Yuvraj Singh was hardly convincing to begin with against Delhi, but a big dose of crowd support and a helping of poor bowling meant he had the opportunity… More »