WalMart enters India in tie-up with Bharti
NEW DELHI: WalMart Stores Inc, the world’s biggest retailer, is entering India’s sprawling retail market through a tie-up with Bharti Enterprises Ltd, beating off a challenge from Britain’s Tesco Plc.
The joint venture will start opening stores in Asia’s fourth largest economy from 2007, and Bharti Enterprise chairman Sunil Mittal said he expected it will have several hundred stores across the country in the next four to five years.
Bharti did not immediately disclose financial terms of the deal, but the Financial Express daily said earlier this month that the two firms would initially invest US$100mil, going up to US$1.46bil, citing industry sources.
The Indian retail industry is estimated at about US$300bil, and is forecast to grow to US$427bil in 2010 and US$637bil in 2015, according to consultancy Technopak Advisors. But small local stores account for 97% of the market.
“This joint venture is a winning combination. WalMart’s logistics skill and Bharti’s execution capability will create a potent force in the Indian market,” Gajendra Nagpal, director at Unicorn Investments.
“Bharti already has a retail network and is a household name in telecoms, and this deal will prove its capabilities as a company with strong execution capability.”
Shares in Bharti’s telecoms unit, Bharti Airtel Ltd, rose as much as 2.6% yesterday after the deal was announced.
“The joint venture with equal stakes will operate in areas where the government allows foreign investment in retail like cash-and-carry and logistics,” Sunil Mittal said.
“The retail shops will be owned by Bharti Enterprises under the WalMart franchise. The idea is to give Indians the lowest price everyday.”
Tesco said on Friday it had ended negotiations with Bharti after failing to clinch a deal, but said it still planned to enter India’s retail sector.
Bharti has a joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to overseas retailers. WalMart has a liaison office in India and expects to step up its sourcing of items such as apparel, textiles and shoes from India, which totalled more than US$1.6bil this year. – Reuters