How Wal-Mart got a foot in the door of India's retail market
The Cedar investment is now the focus of an investigation by India's financial crimes watchdog into whether Wal-Mart broke foreign direct investment rules by putting money into a retailer before the government threw open the sector to global players.
Wal-Mart said it was in compliance with India's FDI guidelines, and had followed all procedures. It said India's central government had sought "information and clarification", which Wal-Mart has provided.
However, several lawyers said the transaction appeared to violate at least the spirit of India's long-standing ban on foreign investment in supermarkets, which it only lifted in September 2012. When Wal-Mart made the investment in 2010, it
was legal for foreigners to own consultants but not retailers, so the shift in Cedar's business description raised eyebrows. "This is a complete camouflage," said Hitesh Jain, a senior partner at ALMT Legal in Mumbai who advises retailers but is not involved with Wal-Mart. "It can be looked at as a violation of
FDI rules because Cedar also operates supermarkets, which was a restricted sector back then." The law, however, is murky. Others stressed that the way Wal-Mart structured the transaction might
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