Walmart books $151M net loss on parting ways with Bharti in India

The world’s largest retailer Walmart Stores Inc has pegged the total cost of its corporate divorce with former partner Bharti Group in the retail venture in India at $334 million, including writing off debt, as per a disclosure in its annual report. 

It did not clarify if it has paid off lenders to Bharti Retail or written off its own receivables from Bharti Retail.

Both the companies had joined hands in 2007 and launched first B2B Best Price Modern Wholesale cash-and-carry store in Amritsar in May 2009. The JV was also to support the supply chain of Bharti Group’s wholly owned consumer facing retail chain Easyday. This ownership structure was to comply with FDI norms which did not allow foreign investment in multi-brand retail stores.

Last November, the two partners decided to part ways with Walmart buying out Bharti’s stake in the wholesale retail JV and striking off the agreement for the backend of Bharti Retail Ltd.

As per the disclosure in the annual report, Walmart acquired Bharti’s stake in their wholesale retail JV for $100 million.

“In addition, the company also terminated its joint venture, franchise and supply agreements with Bharti Retail Limited, which operates Bharti’s retail business in India, and transferred its investment in that business to Bharti. In connection with the agreements related to the Bharti retail business, the company paid and forgave indebtedness of approximately $234 million and recorded a net loss of approximately $151 million in the company’s consolidated statements of income,” Walmart said.

What is notable is that Walmart has said it paid/forgave debt worth $234 million in Bharti’s retail business. This takes off the balance sheet of Bharti Retail, payables of that amount, pushing up the actual deal value for Bharti.

With net sales of over $473 billion, Walmart sported net profit of $15.9 billion in fiscal year ended January 31, 2014. Its net profit declined around $1 billion last year and disengagement with Indian partner seems to have contributed around a sixth of this absolute decline in net income.

Walmart operates 20 wholesale retail stores in India which are not open to consumers and restricted to other retailers.

Earlier this month, it announced to open 50 new wholesale retail outlets in Indian by 2019. It is also extending the B2B e-commerce platform to its Best Price Modern Wholesale store members. As an exclusive virtual store for its members, the e-commerce platform will provide a similar assortment of products, as well as special items.

Last week, the firm made top management changes and named Greg Foran, currently president and chief executive officer of Walmart China, as president and CEO of Walmart Asia. It had also appointed Krish Iyer to head its India operations as part of its growth plan a few months back.

(Edited by Joby Puthuparampil Johnson)

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