After months of speculation, Bharti and Wal-Mart have decided to end their six-year-old partnership in the wholesale operations in India. Wal-Mart, the world’s largest retailer, is now going to buy out Bharti’s share of 50% in the cash-and-carry business for an undisclosed sum.
With this, Best Price Modern Wholesale cash and carry business will come under Wal-Mart’s control.
On the other hand, Wal-Mart had pumped in $100 million in Bharti-owned Cedar Support services via compulsorily convertible debentures (CCDs). Now, after the split, the CCDs in Cedar services will be acquired by Bharti. The Easyday stores by Bharti where Wal-Mart was providing back-end support will also be fully run by the parent company.
Bharti-Wal-Mart entered in an equal joint venture in 2007 and opened the first cash-and-carry store in 2009. Scott Price, president and CEO Wal-Mart Asia, said: “Given the circumstances, our decision to operate independently will be beneficial to both parties.”
This means that Wal-Mart’s entry in retail business in India will get pushed further. After the government allowed 51% FDI in India in September 2012, Bharti was believed to be Wal-Mart’s “natural partners”.
Now that Wal-Mart will have to start looking for another partner before it can kick-start its retail operations in India, its entry into the retail sector is set to be delayed. There have been some concerns on how Bharti will manage its retail operations now considering that the company has been bleeding.
However, Rajan Bharti Mittal, vice-chairman and MD Bharti enterprises, remains bullish on the retail business. “Bharti is committed to building a world-class 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 strong platform to significantly grow the business,” he said.
Experts believe that this separation hardly comes as a surprise. Bharti-Wal-Mart had put a break on expansion in their wholesale business in India for almost a year. Despite plans to add eight stores in 2013, the company did not add a single store.
Bharti and Wal-Mart entered into an equal joint venture in 2007
After the split, Wal-Mart will buy out Bharti’s share of 50% in the cash-and-carry business
This means Wal-Mart’s entry in retail business in India will get pushed further as it will have to look for a new partner.