Wal-Mart Stores Inc is buying out Bharti Enterprises in their equal equity wholesale retail joint venture Bharti Walmart Pvt Ltd, marking a split in their retail venture, as per a joint statement issued on Wednesday.
The breakup of the venture means that now Wal-Mart is free to tie with another local retailer while Bharti can go ahead and bring another foreign retailer as a partner for its existing retail chain.
Upon receipt of required clearances, Wal-Mart would acquire Bharti’s stake in Bharti Walmart, the joint venture between Bharti and Wal-Mart, giving Wal-Mart 100 per cent ownership of the Best Price Modern Wholesale cash and carry business.
Bharti Walmart presently operates around 20 wholesale stores in India under the Best Price Modern Wholesale brand. FDI up to 100 per cent is allowed in wholesale retail business.
Rajan Bharti Mittal, vice chairman and MD, Bharti Enterprises, said: “Bharti is committed to building a retail venture and will continue to invest in Bharti Retail across all formats. We believe that with our current footprint of 212 stores, we have a platform to grow the business.”
Bharti independently operates neighbourhood retail chains under the Easyday brand spread across the north India region besides states like Maharashtra in the west and Karnataka in the south. The Bharti-Wal-Mart JV currently also manages the backend of Easyday chain as a logistics partner. It is not clear if that arrangement will continue after the two partners decided to end the alliance.
Scott Price, president and CEO Wal-Mart Asia said, “Given the circumstances, our decision to operate independently will be beneficial to both parties. Through Wal-Mart’s investment in India, including our cash and carry business, supply chain infrastructure, direct farm programme and supplier development, we want to serve India. 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 in multi-brand retail in India.”
Simultaneously, Bharti will acquire the compulsory convertible debentures (CCDs) held by Wal-Mart in Cedar Support Services, a firm owned and controlled by
Bharti-run Easyday. The firm has been under government scanner for possible violation of FDI norms. While Wal-Mart did not own stake in the firm as FDI was not allowed in multi-brand retail till recently, it held convertible securities to buy a stake.
The government recently opened up the retail sector to foreign investors allowing FDI up to 51 per cent in multi-brand retail and 100 per cent for single-brand retail.
For Bharti this comes amidst a string of such marquee global deals starting with Vodafone for telecom and AXA for insurance and asset management, which came unstuck.
Vodafone, which picked a minority stake in Bharti Airtel years ago, later decided to go ahead and buy controlling stake in Hutchison Essar.
(Edited by Joby Puthuparampil Johnson) Leave Your Comment