Walmart, the world’s largest retailer by sales, is parting from its troubled Indian joint venture with Bharti Enterprises in the aftermath of a series of regulatory investigations and concerns over international investment rules for the country’s retail sector.
WalMart, the worlds largest retailer, will take over its Indian partners 50% stake in Bharti Wal-Mart Pvt Ltd, which runs 20 wholesale stores under the so-called Best Price Modern Wholesale brand.
The companys statement said: “Walmart plans to continue to grow this business while working with the government and interested stakeholders to create conditions that enable foreign direct investment in multi-brand retail.”
However, if WalMart wants to set up its own retail stores in Asias third-largest economy, it will need to find another local partner to own 49% of the business under foreign investment rules that were eased last year.
The company has not opened a single wholesale, or cash-and-carry, store in India for about a year, despite earlier plans to open eight of them in 2013.
“Wal-Mart can now focus on getting its act clean in India and start afresh,” Saloni Nangia, president for retail at Technopak Consultants said for Reuters.
Last year company was alleged into bribery after an internal investigation including a special team of lawyers from a US firm.
Through changes in policies India allowed foreign supermarket companies to own up to 51% of their local operations, but no company has applied to enter Asias third-largest economy under the rule.
Despite the vast opportunities as roughly 90% of the $500 billion retail market is done at family shops using expensive real estate, underdeveloped supply chains and fierce price competition mean margins are razor-thin and most big supermarket operators lose money.
Some officials at global retailers have said privately they are waiting for the outcome of national elections due by May before applying to operate in India in case the rule allowing foreign direct investment in supermarkets is overturned by a new government.
WalMart said on Wednesday it will work with the government to create conditions that enable foreign direct investment in the countrys supermarket sector.
The current consensus among 31 polled investment analysts is to hold stock in WalMart Stores Inc. This rating has held steady since September, when it was unchanged from a hold rating.
Company share price rose almost 1.5% yesterday while being 6.8% up on a year-to-date basis.