“It is now up to Wal-Mart to decide on the direction of the partnership,” said a person in the know of the development. “By Diwali this year, Wal-Mart should be finalising on whether to continue the partnership with Bharti in wholesale retail, whether they want to expand it to front-end retail or exit the partnership altogether. They are now preparing to approach their board for a decision on these issues,” the executive added.
When contacted, a Wal-Mart spokeswoman did not offer any comments saying the company does not comment on market rumours and speculations.
Bharti and Wal-Mart have a 50:50 joint venture for wholesale retail while the Easyday front-end stores are wholly-owned by Bharti Retail.
Since the government allowed foreign retailers to take up to 51% equity in Indian front-end stores, there have been talks that the two firms would form a JV for running the front-end stores also. However, irritants on back-end investment and sourcing norms had held back global retailers from deciding their Indian entry plans. Recently, though the government has sweetened the regulations paving way for the entry of global firms into the Indian market.
The joint venture between the two has also faced a number of controversies in the recent past. The enforcement directorate is probing into Wal-Mart’s $100-million March 2010 investment in buying compulsory convertible debentures in Cedar Support Services, a company owned by Bharti Enterprises and the holding company for Bharti Retail, the company operating front-end retail stores.
Wal-Mart’s investment is being investigated for alleged violation of Foreign Exchange Management Act as FDI in multi-brand retail was not allowed in 2010. Wal-Mart itself started an internal probe in November 2012 into possible violations of US Foreign Corrupt Practices Act in India, which followed an earlier probe in Mexico.
Following the two probes, a number of Bharti Walmart executives have either quit or have been sacked. Bharti Walmart’s chief financial officer Pankaj Madan was sacked in the aftermath of the probe but since then Madan has joined Airtel. In July, Bharti Walmart’s president Raj Jain was replaced by Ramnik Narsey an expert in finance.
The joint venture has also seen the exit of Avneet Bedi, vice-president (asset protection) and Rajeev Chhabra, general manager (legal). Wal-Mart’s representative on the board of Cedar Support Services Munir Suri quit in July while chief operating officer of Cedar Support Services Mahesh Krishna has also quit.
Bharti Walmart has 20 stores across India. The joint venture has also provided support to Bharti’s front-end retail venture Easyday. Since the corruption probes began late last year, Bharti Walmart has halted further expansion due to various reasons.