NEW DELHI -- Wal-Mart's prospective partner in India, Bharti Enterprises, said it would invest as much as $2.5 billion in new stores in the next eight years and will look to Wal-Mart to provide supply-chain management and technology in a collaboration that is being viewed as a test case for foreign retailers here.
Foreign retailers, aside from companies that operate single brands such as Nike, can't open stores in India and must find joint-venture partners. It is an attractive prospect for the likes of Wal-Mart, Carrefour of France and Tesco of Britain because of India's vast market, rising middle class, sizzling economic growth and retail industry, with about $300 billion a year in sales.
Bharti and Wal-Mart are expected to finalize details of their agreement soon. Officials from the Bentonville, Ark., giant, including Michael Duke, vice chairman, who is responsible for the company's international operations, are scheduled to arrive in India this week.
The creation of large retail chains and the arrival of foreign companies have become political issues in India, where millions of small storekeepers and merchants represent a potent political force. Sonia Gandhi, chairwoman of the Congress Party, which leads the governing alliance, recently raised concerns about opening up the retail sector.
Rajan Bharti Mittal, joint managing director of Bharti Enterprises, which owns Bharti Retail as well as Bharti Airtel, a large Indian cellphone network, emphasized at a press conference that the Indian company would own the new stores and would seek to help small farmers link into its new supply chain.
The company plans to open a variety of store formats, from hypermarkets to convenience stores, and employ 60,000 people. The first store is scheduled to open in the first quarter of 2008. During the initial phase, stores will open in the more than 30 Indian cities with a population of at least 1 million. The stores will sell a variety of goods, including groceries, furniture and household products.
Mittal and other Bharti executives declined to elaborate on the company's plans with Wal-Mart beyond saying that they were in discussions for Wal-Mart to provide logistical support, such as supply-chain management and technology. Wal-Mart has not indicated how much it plans to invest in the venture. Nor has the name of Bharti's new stores been decided, Bharti officials said.
The companies' collaboration may also include a wholesale cash-and-carry business. "Our business arrangement with Bharti for wholesale cash and carry, logistics and supply chain are still to be discussed," Wal-Mart said in a statement.
Mittal said Bharti was ready to partner with existing local stores through franchising. Bharti is one of several big Indian companies seeking to establish large retail networks, drawn by a growth rate in the sector estimated at 20 to 25 percent a year.