|
Wal-Mart to enter India in Bharti retail venture
2006-11-27
Wal-Mart Stores Inc.(NYSE:WMT), the world's biggest retailer, will enter India's retail market through a joint venture with Bharti Enterprises, adding its logistics expertise to the conglomerate's knowledge of the local market. Bharti Enterprises Ltd. Chairman Sunil Mittal said on Monday he expected the joint venture to be operating several hundred stores across the country within five years. The shops will be owned by Bharti Enterprises under the Wal-Mart franchise, he said. "The joint venture with equal stakes will operate in areas where the government allows foreign investment in retail like cash-and-carry and logistics," Mittal said. Mittal did not disclose financial details beyond indicating it would be a large investment. "Given the size of India, it will be fair to assume that we are talking in billions of dollars," he told CNBC TV18. A company source said the telecoms and retail conglomerate was looking at opening its first store on August 15, 2007 -- India's Independence Day holiday. Shares in Bharti's telecoms unit, Bharti Airtel Ltd. (BRTI.BO), India's top mobile operator, closed 2.25 percent higher at 630.10 rupees, outpacing the 0.5 percent rise in the main index (^BSESN). Shares in top retailer Pantaloon Retail India (PART.BO) closed down 1.8 percent. "This joint venture is a winning combination. Wal-Mart's logistics skill and Bharti's execution capability will create a potent force in the Indian market," said Gajendra Nagpal, a director at Unicorn Investments. "Bharti already has a retail network and is a household name in telecoms, and this deal will prove its capabilities as a company with strong execution capability." BIG AND GROWING Bharti, a conglomerate that combines telecoms, commercial agriculture, insurance and software businesses, has a retail network of thousands of telecoms service outlets around the country. In the food industry, it has a wholesale joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to the domestic market and to some overseas retailers. Wal-Mart has a liaison office in India and expects to step up its sourcing of items such as apparel, textiles and shoes from India, which totaled more than $1.6 billion this year. India's retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors. Organized, or branded, retail makes up only 3 percent of the market, compared to China's 20 percent and Thailand's 40 percent, but is forecast to rise to 15 to 18 percent by 2011/12. Bharti had also been in joint venture talks with Britain's largest retailer, Tesco Plc (TSCO.L), which said on Friday it had ended negotiations but that it still planned to enter India's retail sector. Monday's announcement also follows the opening of the first stores of Reliance Industries' (RELI.BO) retail unit earlier this month, and other major Indian conglomerates such as the Tata group and the Aditya Birla Group are also moving into the sector. Reliance Industries, the country's top petrochemical company, is investing $5.6 billion in its retail project, which ranges from convenience stores to hypermarkets. It expects revenue of $22 billion from retail operations by 2010/11. Reliance Industries head Mukesh Ambani said there was room for six to eight new players in the retail sector. Foreign retailers are keen to get into India's rapidly growing market, but retailers who sell a variety of brands are allowed to operate only through franchises and licensees or a cash-and-carry wholesale model, such as Metro AG (MEOG.DE) and Shoprite (SHPJ.J) have chosen. In Wal-Mart's case, Bharti will be public face of the joint venture and owner of the stores. Companies that make and sell their own single brand of products are allowed to own a majority stake in a joint venture with a local partner. But India is widely expected to further ease rules on foreign investment.
| 
