Wal-Mart finds a way into Indian market

Associated Press

NEW DELHI — India may soon have stores displaying the Wal-Mart brand despite government rules against foreign companies operating multi-product retail chains here.

The U.S. retail giant has tied up with India's top telecommunications company Bharti Airtel Ltd. in a joint venture that will set up hundreds of stores across the country, Sunil Bharti Mittal, chairman and CEO of the Indian company, said Monday.

“We have signed an MOU (memorandum of understanding) for a joint venture and a franchise agreement,” Mr. Mittal told reporters on the sidelines of an international business summit in New Delhi.

He declined to divulge the financial terms of the deal, but said it “will be a partnership of equals.”

It wasn't immediately clear if Wal-Mart Stores Inc. had given up on plans to set up its own stores in India, where resistance from political groups and domestic businesses has prevented the government from allowing foreign companies to operate multi-product retail chains.

“Wal-Mart was keen to get into India. I think they have chosen the right partner,” Mr. Mittal said. “It is going to be a large investment. . . We are going to be a big player in this market.”

The deal marks Bharti Airtel's first foray into the broader retail market and signals its desire to diversity into new areas of business. The company is already a popular brand in India, offering mobile phone services to more than 24 million users. Mr. Mittal said that Bharti Airtel hopes to learn from Wal-Mart how to operate in the retail market.

It would take several months before the first of the stores opened their doors.

“My own wish is August next year,” Mr. Mittal said. Eventually there will be “several hundred stores across the country [that] will probably carry both brand names.”

India's booming retail market, estimated at more than $200-billion (U.S.), is currently dominated by more than 12 million mom-and-pop shops. Large air-conditioned stores remain a rarity. Sales through company-owned network stores currently totals about $8-billion, or less than 5 per cent of the market.

Rising middle class incomes and an increase in demand for branded products, however, make India a compelling destination for global retail companies.

In recent years, several large Indian companies have diversified into retail business.

Reliance Industries Ltd., one of India's top business groups, has already lined up billion of dollars to invest in a retail chain that would also showcase large superstores like Wal-Mart. The company opened its first retail outlet in the southern Indian city of Hyderabad earlier this month.

Reliance chairman Mukesh Ambani, who also was attending the business summit in New Delhi, welcomed the deal between Bharti Airtel and Wal-Mart, saying it will strengthen competition in the market.

“There is (enough space) for six to eight large players in this market,” Mr. Ambani told reporters.

Bharti Airtel's Mr. Mittal said the deal complies with existing government rules.

Although India does not allow foreign companies to open multi-product retail stores, they can still make wholesale purchases to support their global supply chains.

Wal-Mart already operates a procurement centre in the southern Indian city of Bangalore. The company is expected to source products worth nearly $2-billion from India for Wal-Mart stores worldwide this year. However, the figure is small, compared with $18-billion worth of goods that the company exports from China.

Mr. Mittal said the alliance will help the U.S. company scale up its procurement from India.