Walmart ends alliance with Bharti; to go slow with wholesale business

Wal-Mart Stores Inc on Wednesday ended its 6-year-long troubled alliance with Bharti Enterprises, broke off its franchise agreement in the retail business and announced plans to independently own and operate separate business format in India. (See: Bharti, Wal-Mart in wholesale joint venture, says government).

The two companies have reached an agreement to independently own and operate separate business formats in India.

The agreement is subject to finalisation of definitive agreements and receipt of the requisite regulatory approvals, the two said in a joint statement.

Subject to regulatory clearance, Walmart will acquire Bharti’s stake in Bharti Walmart Private Limited, acquiring 100-per cent ownership in the cash-and-carry wholesale joint venture between Bharti and Walmart.

Walmart said it planned to continue with its wholesale business while working with the government and interested stakeholders to create conditions best suited to the interests of multi-brand retailers.

Bharti Retail will continue to operate ‘Easyday’ retail stores across all formats and invest to expand the business.

As part of the proposed transactions, Bharti will acquire $100 million worth of compulsory convertible debentures (CCDs) held by Walmart in Cedar Support Services, a company owned and controlled by Bharti.

As an immediate fallout of the termination, Bharti group also announced the appointment of former Walmart India Country Head Raj Jain as an advisor to the group.

“Bharti is committed to building a world-class retail venture and will continue to invest in Bharti Retail across all formats. We believe that with our current footprint of 212 stores, we have a strong platform to significantly grow the business and delight customers. We wish Walmart the very best for the future,” Rajan Bharti Mittal, vice chairman and MD of Bharti Enterprises said. 

“Given the circumstances, our decision to operate independently will be beneficial to both parties.

Through Walmart’s investment in India, including our cash-and-carry business, supply chain infrastructure, direct farm programme and supplier development, we want to serve India and its people, and continue to make important social and environmental contributions to the country,” Scott Price, president and CEO Walmart Asia said. 

“Walmart is committed to businesses that serve our members and provide good returns for our shareholders, and we will continue to advocate for investment conditions that allow FDI multi-brand retail in India. We wish Bharti well as they grow their retail business,” he added.

Walmart claims to cater to more than 245 million customers each week through 10,955 stores under 69 banners in 27 countries and e-commerce websites in 10 countries.

With fiscal year 2013 sales of approximately $466 billion, Walmart employs more than 2 million people worldwide.

Bharti Enterprises is one of India’s leading business groups with interests in telecom, agri business, financial services, retail and manufacturing.

The group has a JV – FieldFresh Foods – with Del Monte Pacific Ltd, to offer fresh and processed fruits and vegetables in the domestic as well as international markets. The group has a presence in the retail sector through Bharti Retail that operates stores in multiple formats. 

Walmart and Bharti did not enjoy the best of relationship through six years of joint business operation and the parting of ways was inevitable, especially after the Enforcement Directorate launched a probe into the monetary transactions of $100 million to Cedar Support Services.