London: India’s restrictions on foreign direct investment (FDI) in the retail sector have slowed Bharti’s joint venture with Wal-Mart Stores Inc. but Chairman and CEO Sunil Mittal expects to sign a formal agreement next month.
Mittal, who unveiled plans for a tie-up with the world’s biggest retailer at the start of this year, said there had been a delay to formalising the cash-and-carry joint venture but talks were still progressing.
“It is taking some time because of the restrictions on FDI. You have multiple contracts -- for franchises, brand, IT, merchandising,” Mittal told reporters in London following a trade forum between India and Britain.
“I think the agreement will be signed very soon, I’d say in the next month.”
Foreign multiple brand retailers in India, one of the world’s fastest-growing consumer markets, are limited to cash-and-carry and franchise or licence operations.
Wal-Mart’s talks with Bharti aim to establish a joint venture allowing it to enter the cash-and-carry business in the fragmented $300 billion Indian retail industry.
The sector, which is dominated by small family-run “mom and pop” stores, is forecast to more than double in size by 2015.
Mittal said the delay in signing a formal agreement had not prevented Bharti Retail, which has 100% ownership of the front end of the business, from moving ahead and hiring people.
The wholly owned Bharti subsidiary aims to spend $2.5 billion by 2015 to build hypermarkets and supermarkets and compete with Reliance Industries, Aditya Birla group, the Tata Group and Pantaloon Retail.
Stores open next year
Mittal declined to give a precise time frame for the store roll-out but said it was on track to open an undisclosed number “sometime next year.” Land acquisitions were ongoing, he added.
Speaking in his capacity as Confederation of Indian Industry (CII) chairman, Mittal also dismissed as media speculation rumours that foreign retailers could lose their rights to franchise agreements as part of a protectionist backlash in the sector.
India did not have a history of repealing laws, he said.
While the backlash in India has led to protests against Wal-Mart in some towns amid fears the retail giant will put “mom and pop” stores out of business, it has also cooled some of the early fervour US and European retailers showed about entering the fast-growing market.
Mittal said he believed “the competition should be intense” in Indian retail and he expected laws on foreign ownership would be relaxed in the next few years, possibly if there were a change in government in two years.
“If there are more reform-orientated people in this government we will see it happen quicker,” Mittal said.
“In a country of India’s size you never have one kind of store or another. You will have both. You will have large stores, you will have small stores and you will have very large stores, and the customers will be better served.”