News: Bharti, Wal-Mart in retail tie-up

(RTR 27/11/2006) New Delhi - Bharti Enterprises Ltd.and US retailer Wal-Mart Stores Inc have agreed to a joint venture to enter India's lucrative retail sector, Bharti's chairman said on Monday.

"The joint venture with equal stakes will operate in areas where the government allows foreign investment in retail like cash-and-carry and logistics," Bharti Enterprise Chairman, Sunil Mittal, said.

"The retail shops will be owned by Bharti Enterprises under the Wal-Mart franchise. The idea is to give Indians the lowest price everyday."

Foreign retailers are keen to enter India's rapidly growing retail market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, as Metro AG and Shoprite have chosen.

Bharti gave no details on investment and roll out plans.

Single-brand retailers are allowed to own a majority stake in a joint venture with a local partner, but India is widely expected to further ease rules on foreign investment.

The Indian retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors.

Organised, or branded, retail makes up only 3 per cent of the market, compared to China's 20 per cent and Thailand's 40 per cent.

But that share is set to rise to 15-18 per cent by 2011/12, with the entry of large Indian firms including Bharti, Reliance Industries, the Tata group and the Aditya Birla Group.

Reliance Industries, the top petrochemical company, recently opened its first grocery stores and is investing $5.6 billion in formats ranging from convenience stores to hypermarkets. It expects revenue of $22 billion from retail operations by 2010/11.

Cigarette maker ITC Ltd. has also opened its first grocery stores and plans to add outlets quickly.

Bharti has a joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to overseas retailers. Wal-Mart has a liaison office in India and expects to step up its sourcing of items such as apparel, textiles and shoes from India, which totalled more than $1.6 billion this year.

Tesco also sources food and non-food items from India.