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Wal-Mart, Bharti JV To Tap India Wholesale Market
August 06, 2007: 11:38 AM EST
(This updates a story published at 1035 GMT, with company quotes, details)
NEW DELHI -(Dow Jones)- Bharti Enterprises Ltd. and Wal-Mart Stores Inc. (WMT) Monday signed a pact to create a joint venture marking the global retail giant's foray into India's fragmented wholesale market business.
Indian laws don't allow foreign multiple-brand retailers like Wal-Mart to sell directly to the end-consumer, but do allow them to run wholesale operations and provide back-end support to Indian retailers.
"This is very significant for Wal-Mart because it is the formal entry of Wal- Mart in India into the cash-and-carry (or wholesale) business," Raj Jain, country president for Wal-Mart operations in India said.
If and when foreign multi-brand retailing is permitted in India "then absolutely, we'd like to come to the front-end," he added.
The 50:50 joint venture, Bharti Wal-Mart Pvt. Ltd., is for cash-and-carry or wholesale, supplying goods to smaller retailers, manufacturers and farmers. It will also carry out back-end supply-chain management operations, the companies said in a joint statement.
Bharti Wal-Mart will also supply retailers like Bharti Retail, a unit of Bharti Enterprises that is setting up a separate wholly-owned chain of retail outlets in India.
Bharti said in February that its retail arm would invest $2.5 billion by 2015 to establish multi-format retail stores in India employing about 60,000 people.
Earlier Monday, another agreement was signed between Bharti Enterprises and Wal-Mart for Wal-Mart to provide technical support to Bharti Retail's yet-to-be named chain of retail stores.
"This venture promises to bring great value to millions of farmers, artisans, small manufacturers and retailers across India," Bharti Enterprises Chairman Sunil Bharti Mittal said in a statement.
U.S.-based retailer Wal-Mart, which has only been procuring goods from India since 2001, said it may also turn its local wholesale suppliers into global suppliers. Wal-Mart sourced about $600 million worth of merchandise, such as apparel and jewelry, from India in 2006.
"We would also like to leverage our global scale to transform some of these suppliers into exporters with access to our global markets over time," Mike Duke, vice chairman of Wal-Mart said in a statement.
The Bharti Wal-Mart joint venture was first announced in 2006 but ran into opposition from a key ally of India's ruling coalition government, The Communist Party of India (Marxist), on fears it would harm the livelihoods of millions of small shop owners.
Bharti Wal-Mart said it will launch its first wholesale store by the end of 2008, opening up to 15 such facilities over the next seven years, employing about 5,000 people.
A typical facility will sell goods ranging from fruit and groceries to electronics and home appliances. The first one is likely to be sited in northern India where the country's agricultural base lies, Bharti officials said.
Wal-Mart isn't the only retail giant to set its sights on India's lucrative retail market, estimated at $350 billion, and the subcontinent's burgeoning middle class.
Wal-Mart's global rivals, such as France's Carrefour SA (12017.FR), and U.K.'s Tesco PLC (TSCO.LN), have also been angling for a piece of the market.
Major Indian conglomerates such as Reliance Industries Ltd. and Aditya Birla Group have their own plans to build nationwide networks of supermarkets, department stores and convenience stores.
-By Nitin Luthra and C.R. Jayachandran, Dow Jones Newswires; +91-11-2307-4020; abhrajit.gangopadhyay at dowjones.com
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