Wal-Mart Has Deal to Enter India in New Joint Venture
Retailer Seeks Foothold In Restrictive System

By Rajesh Mahapatra
Associated Press
Tuesday, August 7, 2007

NEW DELHI, Aug. 6 -- Wal-Mart Stores and Bharti Enterprises of India signed a deal Monday to jointly build wholesale outlets that would buy goods from farmers and small manufacturers and sell to retailers through a nationwide supply chain.

The deal may help the U.S. company eventually gain a foothold in India's booming but much-protected retail business, which is dominated by an estimated 12 million mom-and-pop shops. The market is thought to be worth $250 billion and expanding by 20 percent annually.

Indian laws do not allow multi-brand foreign retailers to sell directly to consumers, but they can run wholesale operations and provide back-end support to Indian retailers. Indian companies are also allowed to operate stores selling foreign brands under franchise from their producers.

Wal-Mart of Bentonville, Ark., imports about $600 million worth of goods from India, a fraction of what its buys from China for its stores worldwide.

Wal-Mart and Bharti Enterprises appeared to have worked around India's restrictive rules. The companies signed two agreements, which conform to existing rules and regulations, said Rajan B. Mittal, Bharti's chairman and group chief executive.

Under the first agreement, the two companies are to establish a joint venture for wholesale operations in India. The venture "will help drive efficiencies across the supply chain and work toward the betterment of India's farmers, manufacturers and retailers," Wal-Mart Vice Chairman Michael T. Duke said in a joint statement.

The second agreement would allow Wal-Mart to share its technology and expertise with a chain of retail stores that Bharti plans to build through its subsidiary, Bharti Retail. It was not clear if Bharti's retail operations would also be able to display the Wal-Mart brand.

The deal faces political opposition and scrutiny from the government.

Wal-Mart is not the only company to consider India's retail market

Global retailers such as Carrefour of France, Tesco of Britain and Metro of Germany have lobbied the Indian government to liberalize its retail trade laws. Opposition from powerful leftist allies has, however, prevented the Indian government from allowing foreign retailers to open their own stores here and forced companies like Wal-Mart to explore alternatives.

If approved, the deal with Bharti would mark Wal-Mart's first entry into a large country in a decade -- the last one was China, said Raj Jain, head of Wal-Mart's India operations.

The first wholesale cash-and-carry facility is scheduled to open by the end of next year. Over the next seven years, the venture is expected to open 10 to 15 such facilities and employ about 5,000 people.

Both companies declined to comment on financial details.

A typical wholesale facility would have 50,000 to 100,000 square feet, and sell such products as fruits and vegetables, groceries and staples, stationery, footwear, clothing, consumer durable goods and other general merchandise items, Jain said.