World’s biggest retailer Wal-Mart and Sunil Bharti Mittal-promoted Bharti Enterprises signed agreements on Monday to establish the 50:50 JV company Bharti Wal-Mart Pvt. Ltd, for wholesale cash-and-carry and back-end supply chain management operations.
By the first agreement, Bentonville, Arkansas-based Wal-Mart is set to enter India by end-2008. The JV company will set up 8-15 cash-and-carry, or wholesale, stores over seven years and is expected to employ some 5,000 individuals. These stores – with each to be spread over 50,000 to 1 million square feet – will sell groceries, consumer appliances and fruits and vegetables.
The second agreement pertains to technology transfer and training for Bharti’s front-end retail operations. The retail stores will be set up by a fully owned subsidiary of the New Delhi-based company.
“The wholesale cash-and-carry business will cater not only to the organised retailers, but also to small kirana stores, fruit and vegetable resellers, restaurants and retailers across India,” Bharti Enterprises MD Rajan Mittal said. He also assured that stores will be opened in tier II and III towns.
The cash and carry venture will serve other big retailers such as Bharti Retail, which is setting up a chain of retail stores that are 100 per cent owned and operated by Bharti. The retail stores, scheduled to be operational by the first quarter of 2008, can source from the wholesale venture or from any other company.
“We shall be sourcing products from small farmers, artisans and small manufacturers,” Mittal said.
For the record, Bharti had announced plans for a JV with Wal-Mart in November 2006. The companies decided to enter wholesale cash-and-carry operations since the Indian government has not opened up multi-brand retail for foreign players. Indian laws currently allow 51 per cent foreign direct investment (FDI) for single-brand outlets. The 100 per cent option is available only in wholesale retail.
Raj Jain, president, Wal-Mart India operations, said, “There are 12 million kirana stores across the country, while less than one million are served by FMCG companies. So, the potential to serve them is huge.” None of the parties disclosed projected investment, turnover, or possible revenue realisation.
The joint venture will source 90 per cent of the goods from India, while the rest will be imported. At present, Wal-Mart sources goods worth nearly $600 million from India.