How Wal-Mart got a foot in the door of India's retail market

filed with India's registrar, the investment was in the form of debt that was convertible into equity. That clouds the issue of whether Wal-Mart took a stake in Cedar or provided financing. Bharti and Wal-Mart both declined to provide additional details on how the transaction was structured.

Senior government officials told Reuters that India's central bank had asked the Enforcement Directorate, which investigates financial crimes, to look into whether Wal-Mart violated the law by investing in a supermarket retailer before foreign investment rules were relaxed. If Wal-Mart did break the law, it could face a 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.

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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

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