Wal-Mart, Bharti ink cash-and-carry venture

The agreement, signed Monday has set the stage for Wal-Mart’s entry into the world’s second fastest growing market. The two companies had signed a memorandum of understanding last November.

The first cash-and-carry outlet for wholesale retailers will open by end-2008. The joint venture is expected to generate employment of at least 5,000 people over the next seven years.

While current government regulations permit 100 percent foreign direct investment (FDI) in cash-and-carry and logistics, it is banned in front-end retail. Hence, Bharti is likely to manage the front-end of the retail business, while Wal-Mart would take care of the supply chain, logistics and other back-end operations.

Last November, Bharti Group Chairman Sunil Mittal said the agreement was “a partnership of equals. Big investments are in the pipeline."

Before the Wal-Mart deal had been announced, Bharti was had also been in active discussions with British retailer Tesco and Carrefour of France before talks with them failed.

India's booming retail market, estimated at about $300 billion, is growing at a brisk pace of 30 percent per annum and is largely dominated by more than 15 million unorganized retail stores across the nation with large air-conditioned stores remaining a rarity.

Rising middle class incomes and an increase in demand for branded products are driving the growth of retail business in India.

Nevertheless, organized retailing, selling through company-owned network stores, currently totals about $8 billion or less than 5 percent of trade in the country.

The government has so far allowed 51 percent foreign direct investment (FDI) in retailing by companies which sell only a single brand such as Reebok, Nike, Nokia or Benetton.