Wal-Mart Stores wmt and India's Bharti Enterprises have reached a deal to jointly build wholesale outlets and manage a supply chain for retail stores across the country, the companies said Monday.
The deal is intended to help the U.S. company gain a foothold in India's booming, but protected, retail business, which is currently dominated by an estimated 12 million mom-and-pop shops. It faces political opposition and scrutiny of a government that doesn't allow foreign investment in multi-brand retailing.
Wal-Mart and Bharti Enterprises have signed two separate agreements, both of which conform to existing rules and regulations, said Bharti's Managing Director Rajan Mittal.
Under the first agreement, the companies will set up "a 50-50 venture for wholesale cash-and-carry and back-end supply chain management operation in India," their joint statement says. The firm will be called Bharti Wal-Mart Private Limited.
The second agreement lets Wal-Mart share technology and expertise with Bharti for its retail stores, which will be set up by Bharti Retail, a fully owned subsidiary of the New Delhi-based company. It also gives an option to both companies to display their brands at the stores, although it is not clear how that can be done under current restrictions.
On a standalone basis, each of these agreements may not violate Indian laws, but together the deals amount to allowing Wal-Mart an entry into the country's retail business.
The Indian government has not raised any objection to the tie-up between Wal-Mart and Bharti since it was made public in November last year. Officials said they would scrutinize the deal once the companies work out the agreements.
If cleared, the deal announced Monday would mark Wal-Mart's first entry into a large country in a decade — the last one was China, said Raj Jain, head of the company's India operations.
"This is very significant ... India is a very large country with a billion people and has a very bright future," Jain said.
The first wholesale cash-and-carry facility is to open by the end of 2008. Over the next seven years, the venture is expected to open 10 to 15 facilities and employ about 5,000 people.
Both companies declined to comment on financial details of the deal.
A typical wholesale facility will be 50,000 to 100,000 square feet and sell a range of fruits and vegetables, groceries and staples, stationery, footwear, clothing, consumer durables and other general merchandise items, said Jain.