Bharti, Wal-Mart opt out of franchise agreement to own separate stores

Bharti Enterprises and Wal-Mart Stores, Inc. announced on Wednesday that they have reached an agreement to independently own and operate separate business formats in India and discontinue their franchise agreement in the retail business. However, it is subject to the finalisation of definitive agreements, and the receipt of the requisite regulatory approvals.

Upon the receipt of required clearances, Wal-Mart would acquire Bharti’s stake in Bharti Wal-Mart Pvt Ltd, a joint venture between the two companies, giving Wal-Mart 100 per cent ownership of Best Price Modern Wholesale’s cash-and-carry business.

Wal-Mart plans to continue to grow this business while working with the government and interested stakeholders to create conditions that enable foreign direct investment (FDI) in multi-brand retail.

As part of the proposed transactions, Bharti will acquire the compulsory convertible debentures (CCDs) held by Wal-Mart in Cedar Support Services, a company owned and controlled by Bharti. Bharti Retail would continue to operate the easyday retail stores across all formats and invest in and grow the business.

Rajan Bharti Mittal, vice-chairman and managing director, Bharti Enterprises, said, “Bharti is committed to building a world-class retail venture, and will continue to invest in Bharti Retail across all formats.”

“We believe that with our current footprint of 212 stores, we have a strong platform to significantly grow the business and delight customers. We wish Wal-Mart the very best for the future,” he said.

Speaking on the occasion, Scott Price, president and chief executive officer, Wal-Mart Asia, said, “Given the circumstances, our decision to operate independently would be beneficial to both parties.”

“Through Wal-Mart’s investment in India, including our cash-and-carry business, supply chain infrastructure, direct farm programme and supplier development, we want to serve India and its people, and continue to make important social and environmental contributions to the country,” he said.

“Wal-Mart is committed to businesses that serve our members and provide good returns for our shareholders, and we would continue to advocate for investment conditions that allow FDI in multi-brand retail in India. We wish Bharti well as they grow their retail business,” Price added.