Bharti Enterprises and the world's largest retailer Wal-Mart on Wednesday decided to break up their almost six-year-old 50:50 partnership in India which runs cash-and-carry stores. The development, though expected for quite sometime now, is still ironical as it comes at a time when the government has opened the multi-brand retail sector to foreign investment and the Bharti-Walmart JV was expected to be the first to venture into this area.
In fact, Bharti Enterprises vice-chairman Rajan Bharti Mittal had said in September last year, when the government had first opened up the multi-brand retail sector to foreign investment, that the two extending their JV to the front-end stores was a “natural progression of the partnership”.
However, strains in the relationship had emerged later when Wal-Mart got embroiled in bribery charges, leading the government to order an inquiry into the matter. The charges led it to sack its CFO and, subsequently, also saw the easing out of its India CEO Raj Jain. The CFO was later hired by Bharti Airtel. Wal-Mart is also embroiled in an enforcement directorate probe into its $100-million investment in Cedar Support Services, which is a subsidiary of Bharti Enterprises and the holding company of Bharti Retail, through compulsory convertible debentures. Bharti, however, said that the break-up of the joint venture was purely a business decision and had nothing to do with the corruption charges against Wal-Mart. It said that all investments were done in compliance of government guidelines.
The lid on the suspense over the future of the partnership was lifted recently when Bharti Group chairman Sunil Bharti Mittal said in Johannesburg that he expected Wal-Mart to take a decision about the future of the JV firm within October. Subsequently, Wal-Mart Asia CEO Scott Price said in Indonesia on October 6 that a partnership in the front-end stores was not “tenable” at this point of time. However, the company was committed to its back-end, cash-and-carry business.
Though both the companies have reiterated their commitment to the businesses they are in, analysts maintain that both need a partner if they want to grow in their respective businesses. Wal-Mart can have