Wal-Mart Stores Inc. (NYSE:WMT) paid dearly to end its relationship with Bharti Retail, with whom it had partnered to open stores in India, including a loss of millions of dollars for the American retailer, the company said in its annual report.
According to the Arkansas-based retail giant, it paid about $100 million to acquire its New Delhi-based partner's stake in Bharti Wal-Mart Private Limited, the joint venture that was formed in 2007. Wal-Mart also had to write off $234 million in debt and other investments to complete the corporate break-up, resulting in a net loss of $151 million, according to the company's latest balance sheet.
“Upon completion of the transaction, the Company became the sole owner of the cash & carry business in India. In addition, the Company also terminated its joint venture, franchise and supply agreements with Bharti Retail Limited (“Bharti Retail”), which operates Bharti’s retail business in India, and transferred its investment in that business to Bharti. In connection with the agreements related to the Bharti retail business, the Company paid and forgave indebtedness of approximately $234 million," the company said, in its annual report.
The Bharti Wal-Mart venture had gone through a rough patch over the past two years amid bribery allegations aimed at the American company, which was investigated by Indian authorities even as the company conducted a wide-ranging internal probe to see if it had violated U.S. anti-bribery laws. The investigations, which led to the suspension of top-level officials, also forced the company to put its expansion plans in India on hold, straining the relationship between the two companies, The Economic Times, or ET, a local business newspaper, reported.
“Inquiries or investigations regarding allegations of potential FCPA (Foreign Corrupt Practices Act) violations have been commenced in a number of foreign markets where the company operates, including, but not limited to, Brazil, China and India,” the company said.
Both Wal-Mart and Bharti are now trying to grow their individual businesses in India. Wal-Mart, which is now present in wholesale retail, reportedly said that it has invested an additional 13.3 billion rupees ($219 million) in its India operations, after splitting up with Bharti and is looking to add 50 "Best Price" stores in the next five years, ET reported.