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FDI in Retail: Walmart may be 1st one to enter India

November 25, 2011 12:02 IST

America's Walmart is likely to be the first overseas chain to enter the $590-billion Indian retail sector, as the the world's biggest retail giant is extending its parternship with Sunil Mittal's Bharti Enterprises.

The multinational company based in Bentonville of Arkansas has already a 2007-signed equal joint venture with Bharti. Called Bharti Walmart, it runs 14 cash-and-carry stores in the country - and provides back-end support to the stores set up by Bharti Retail, a unit of the Delhi-headquartered Indian business conglomerate.

Walmart, which has been in the business since 1962 to become the world's biggest private employer in present times, could now go ahead with Bharti for the retail foray, a top executive who works with the joint venture company said on Thursday.

"Walmart would definitely look at the current relationship for the retail foray. Why will you go for another partner if you have a established partner with you," he said.

The official said it would take "four to six months" to sign a new venture, if there was an agreement in place. "If you already have an understanding with the partner, you can open multi-brand earlier than others," he added.

Bharti Retail currently runs 140 easyday stores, 13 easyday market outlets and one easyday hyper stores. Retail consultancies have sensed the depth of the matter. "It takes at two to three years to understand a market like India," notes Purnendu Kumar, vice president at Technopak Advisors.

"More than the new entrants, I feel existing global

retailers will find it easy to scale up."

UK's Tesco Plc, among the largest global retailers, is also waiting to enter Indian retail.The 1919-founded Tesco has a franchise agreement with Tata-run Trent to provide the latter its supply chain solutions and technical know-how among others.

French retailer Carrefour, which has presence in the cash-and-carry business in India, is yet to finalise an Indian partner for their multi-brand foray.

Future Group, which runs Pantaloon Retail, is exploring tie-ups with international retailers to sell stakes in its various retail formats such as electronic and durable format eZone, besides value formats such as Big Bazaar, Food Bazaar, KB's Fair Price.

"Talks are on with many players," said a Future Group official. "But the culmination of the talks will entirely depend on clarity on FDI norms."

The Rs 12,000-crore Future group is already in talks with Lawson, the largest retailer from Japan, where the latter will invest in the holding company that will control firms which supplies to Big Bazaar, Food Bazaar and KB's Fair Price among others.

Both have appointed investment bankers and are at fairly advanced stages of talks, says the executive.

Such stake sales are important for the Future Group, whose flagship is ridden with a Rs 4,200-crore debt and debt equity of 1.3:1 at a time when consumer spending is tapering off due to rising prices, high interest rates and slow economic growth.

"There are ways to deal with debt," notes a company insider. "Only that you should understand there are very few retailing companies of large size and who are open for partnerships."

Raghavendra Kamath in Mumbai