Bharti, Wal-Mart announce deal
The two companies will study and evaluate the retail market and identify business opportunities together.
By INDIATIMES NEWS NETWORK |
NEW DELHI: Bharti Enterprises and Wal-Mart Stores, Inc. announced on Monday that they have signed a memorandum of understanding under which they will jointly explore business opportunities in India. This will allow the two companies to study and evaluate the retail market in India and identify business opportunities together within the existing guidelines.
India's booming retail market, estimated at about $200 billion (euro 160 billion), is currently dominated by more than 12 million mom-and-pop shops. Large air-conditioned stores remain a rarity.
While current government regulations permit FDI in cash & carry and logistics, it is banned in front-end retail. Therefore, it is expected that while Wal-Mart will invest in the cash & carry and logistics businesses, there could be a franchising agreement in the retail sector. Both the partners will jointly decide on a brand name.
Sources say that while Bharti and Wal-Mart had been in talks for a while, discussions between the two gathered momentum and intensity in September. As a matter of fact, Bharti and Tesco had almost decided to announce an alliance on October 10, but the feeling in the Bharti camp is that Wal-Mart moved faster than Tesco.
It is said that the royalty and investments offered by Wal-Mart is far higher than that offered by Tesco and it could provide the scale and pricing to the alliance that other retailers can not.
India's booming retail market, estimated at about $200 billion (euro 160 billion), is currently dominated by more than 12 million mom-and-pop shops. Large air-conditioned stores remain a rarity.
While current government regulations permit FDI in cash & carry and logistics, it is banned in front-end retail. Therefore, it is expected that while Wal-Mart will invest in the cash & carry and logistics businesses, there could be a franchising agreement in the retail sector. Both the partners will jointly decide on a brand name.
Sources say that while Bharti and Wal-Mart had been in talks for a while, discussions between the two gathered momentum and intensity in September. As a matter of fact, Bharti and Tesco had almost decided to announce an alliance on October 10, but the feeling in the Bharti camp is that Wal-Mart moved faster than Tesco.
It is said that the royalty and investments offered by Wal-Mart is far higher than that offered by Tesco and it could provide the scale and pricing to the alliance that other retailers can not.
Earlier, Bharti chairman Sunil Mittal had confirmed that discussions between his group and the UK retail chain Tesco for a retail alliance had been terminated. “We have decided to disengage from the discussions.
I have great respect for Tesco and believe that it is a great company. But we have found a partner with whom there is a greater strategic fit. We will announce our plans this week,” said Mr Mittal. It is learnt that Mr Mittal flew down to London and communicated this decision to Tesco on November 22.
I have great respect for Tesco and believe that it is a great company. But we have found a partner with whom there is a greater strategic fit. We will announce our plans this week,” said Mr Mittal. It is learnt that Mr Mittal flew down to London and communicated this decision to Tesco on November 22.
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