penalty of up to three times its initial $100 million investment, they said. That would not only be a setback for Wal-Mart, it would also weaken consensus-building efforts by India's minority government, led by the Congress party. The party is desperate for more support from across the political spectrum after its decision to let foreign players into India's retail market came under fire from the opposition and even some of its own allies.
Wal-Mart and other retailers lobbied for years to gain access to India's market, lured by the promise of a middle class that will one day rival China's. But local opposition has been fierce because of concern that Wal-Mart and its peers will knock millions of mom-and-pop stores out of business.
Reuters pieced together details of Wal-Mart's investment in Cedar by examining records from India's Registrar of Companies and through interviews with government officials involved with the matter, as well as several lawyers who work with retailers. The documents reveal a web of companies set up under the Bharti umbrella, which runs India's largest telecom operator, Bharti Airtel. The group, which also has retail interests, signed a joint venture with Wal-Mart to run wholesale stores in 2007, shortly after India allowed full foreign ownership of wholesale retail operations.
That same year, the Bharti group formed Bharti Retail Holdings Ltd, which in turn owned a subsidiary called Bharti Retail Ltd which operated supermarkets and hypermarkets. In December 2009, Bharti Retail Holdings changed its business description to consulting services from retail, the documents filed with India's Registrar show. A month later, the company changed its name to Cedar.
The timing of the change in name and business is significant because when Wal-Mart invested in Cedar in March 2010, foreign companies could legally own 100 percent of an Indian consulting firm but not a supermarket retailer. Cedar issued "compulsorily convertible debentures" to Wal-Mart Mauritius Holdings Co Ltd, which would be exchanged for 49 percent equity 18 months after the issue date. The conversion date has since been pushed back twice, to September 2013, which would be after India's relaxation of