The American retailer will buy out Bharti’s 50% stake, giving the US retailer 100% holding in the company that runs wholesale stores called Best Price Modern.
However, Wal-Mart will need to find another joint-venture partner to own 49% of the business if it wants to set up its own retail stores in India, according to regulations on foreign retailers instituted last year.
The partnership between Wal-Mart and Bharti came about in 2007, but was expected to really take off this year after the Indian government relaxed rules on foreign direct investment, allowing foreign retailers to invest up to 51% in their own local operations. However the rules still remain fiercely protectionist, with foreign investors being forced to source up to 30% of their products from Indian small and medium producers. As of this year, no foreign brands have opted to take advantage of the loosening of regulations.
Scott Price, CEO of Walmart Asia, said the rules represented a “level playing field issue,” according to the New York Times. Price criticised the rules because Indian retailers were not required to follow them. He also said the small and medium Indian enterprises did not have the capacity to produce on the scale that Walmart needed, to help it meet the government’s sourcing mandate.
India’s finance minister, Pallaniapan Chidambaran, responded to Price’s statements in an interview with Reuters, saying, “We have liberalised FDI in single brand retail and multi-brand retail to the extent that we can. People have to accept this and decide whether they want to invest or not.”
The venture has also been surrounded by controversy, with Wal-Mart firing several workers due to violations of US anti-corruption laws. The retailer has also been under
investigation by the Indian government since December, for having allegedly violated the nation’s rules on foreign investment in the retail sector. The company is also carrying out an internal investigation on possible violations of U.S. anti-corruption laws in the country.