Simultaneously, the buzz is that the $260-bn retailer is also planning a cash-and-carry business in the country, in joint venture (JV) with the Bharti group, sources told ET.
Bharti has been talking to Tesco, and the company maintains it has not taken a final call on who its partner will be. When contacted, a Bharti spokesperson said, “We continue to be in talks with all leading global retail majors and no decision has been reached yet on who will be our partner.”
According to sources, Bharti is interested in getting into a holistic tie-up with a foreign partner which will involve cash and carry, logistics, and retail franchising.
While government regulations currently ban FDI in retail , the foreign partner can fully own the cash-and-carry business.
The buzz is that Wal-Mart and Bharti are giving final touches to a JV in the cash-and-carry business.
“The JV will set up 2 separate companies in India.
- One will be a back-end company, with business interests in cash-and-carry.
- The other company will deal with front-end retail, based on a franchising model.
- Under this model, the back-end cash- and-carry operations will act as a single sourcing point for the front-end consumer retail business.
- The Bharti Group is clear that it would get into a partnership with a foreign player only when it is wholistic in nature, including back-end, front-end and logistics,” said an industry source.
Wal-Mart had been in talks with all prominent Indian retailers as well as a couple of real estate companies for entering India.
The world’s largest retailer was always in favour of forging an alliance with a strong partner who is also politically savvy. Not surprisingly, it has held talks with Reliance, the Aditya Birla Group and Mahindra & Mahindra in the past.
At the same time, as it’s well known, the entire top brass of Wal-Mart International has lobbied with the government to open the retail sector to FDI, which did not break much ice. After two years of hectic lobbying, Wal-Mart has finally understood India is in no hurry to allow foreigners in food and grocery retail. Also, it has already lost sufficient ground to Reliance Retail, which has started rolling out its stores.
Sources also add Wal-Mart needs Brahma to enter India, given the latter’s successful track record in telecom and the political goodwill that it enjoys. Also, it is learnt Bharti’s retail infrastructure is in place for Wal-Mart to roll out quickly.
India is also important for the US retailer as this is where the company’s future growth lies. Wal-Mart recently re jigged its geographical presence around the world. Faced with intense competition from local retailers, it exited large markets like South Korea and Germany. Currently in the Asian region, it has retail presence only in China with 66 stores and Japan where it has 391 stores.
According to sources, the business model that Wal-Mart has finally zeroed in on India is similar to that of African food retail chain Shoprite.
Apart from the cash-and-carry format, the chain also operates in India under the franchisee route. The company is setting up a 70,000 square feet hypermarket mall at Mulund in Mumbai, in agreement with the Nirmal Lifestyle Mall.