French retailer Carrefour SA (EPA:CA) is planning to move out of the wholesale business that it has in the Indian market, after failed talks with the Bharti Group to sell its outlets.
Carrefour, one of the largest retailers in the world, sees a very bleak possibility of the Indian government allowing foreign retailers to set up multi-brand retail stores in the country, local news reports said. The company has already seen several high-level exits and may cut some more jobs in the coming few weeks, as a part of its exit strategy.
Carrefour has five outlets in the country, including Delhi and Bangalore and would become the first foreign retailer to move out of the market.
Foreign retailers planning to tap the $518 billion Indian market need a local player to operate in the country for multibrand retail with foreign direct investment (FDI), which has a cap of 51 per cent, while cash-and-carry businesses can get FDI up to 100 percent. Global retailers have faced issues with India's retail regulations, like mandatory 30 percent local sourcing from small- and medium-sized enterprises, and the choice given to different states to accept or deny FDI in multibrand retail.
The $76 billion retailer declined comment on the latest report, but has previously withdrawn from markets including Malaysia, Singapore, Indonesia and Greece during periods of economic slowdown.
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India, which is currently holding parliamentary elections, expects to see a government formulated by the Bharatiya Janta Party. Rooted in Hindu nationalism, the party has made clear its disapproval of FDI in multibrand retail, and has promised not allow such investments if it comes to power.
Retail giants like Tesco Plc ADR (OTCMKTS:TSCDY) and Wal-Mart Stores Inc. (NYSE:WMT) entered the Indian retail sector through the wholesale cash-and-carry route, hoping that multibrand retail would also be opened up. Since then, Tesco has formed a joint venture with the Tata Group in order to operate in multibrand retail in the country, while Wal-Mart dissolved its joint venture with Bharti and plans to stick to wholesale/retail.