Global retail giant Wal-Mart Stores, Inc and Indian firm Bharti yesterday said they were ending their partnership in the country’s retail sector and would now operate separate businesses.
The companies said in a joint statement that they would “discontinue their franchise agreement in the retail business” in India and would “independently own and operate separate business formats.”
Wal-Mart has said it wants to operate supermarkets in India after New Delhi moved last year to open up the retail sector to foreign companies in a bid to boost India’s sharply slowing economy.
However, the world’s biggest retailer has been frustrated by the government’s conditions for foreign investment, and the faltering relationship with Bharti, owner of India’s top mobile phone firm.
Wal-Mart has operated since 2007 in India as a wholesaler via its partnership with Bharti, but it is unable to sell directly to consumers.
Wal-Mart had said last year it wants to launch its first store in India within two years, but the company needs a local partner, and it has yet to make a proposal to the government for opening retail stores.
Wal-Mart said in July that it was unable to meet requirements stipulating that 30 percent of its products must come from local small-scale industries for it to open stores.
Last year, New Delhi allowed foreign supermarkets to establish 51 percent joint ventures in the country as part of the government’s drive to seek outside investment to boost the economy, but so far none has applied.
India’s opposition lawmakers in the past have expressed concern over Wal-Mart’s entry, saying it will hurt local “mom and pop” stores.
Under the terms of the breakup, Wal-Mart will acquire Bharti’s stake in the wholesale cash and carry business, giving it 100 percent ownership, the statement said.
“Given the circumstances, our decision to operate independently will be beneficial to both parties,” Wal-Mart Asia president and chief executive Scott Price said in the statement.
Price said Wal-Mart would “continue to advocate for investment conditions that allow FDI [Foreign Direct Investment] multi-brand retail in India.”