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BENTONVILLE, Ark. -- Wal-Mart Stores, Inc. is planning to open hundreds of stores across India via a partnership with Bharti Enterprises, Ltd., an Indian business conglomerate focused largely on telecommunications, according to published reports. Financial terms of the deal were not disclosed.
Under the deal, Wal-Mart and Bharti Enterprises will set up a joint venture to manage procurement, inventories, and logistics, while stores will be set up under a franchise agreement, said Sunil Bharti Mittal, the chief executive of the Indian company.
Wal-Mart, which is already the world's largest retailer, is most likely partnering with Bharti Enterprises because of India's tough restrictions on foreign companies, according to reports. Political groups and domestic businesses have prevented India's government from allowing foreign companies to operate multiproduct retail chains.
Wal-Mart has been focused on entering the Indian market for several years, according to analysts. "For some time now Wal-Mart has made clear its intention to enter the Indian market, and has actively lobbied the Indian government to relax the legislation surrounding Foreign Direct Investment (FDI)," noted Fiona McTavish, senior business analyst international at IGD.
In preparation for market entry, Wal-Mart appointed Raj Jain as its president of Wal-Mart Emerging Markets in May 2006. Jain is c.e.o. designate of Wal-Mart's Indian operation, and has been leading a small liaison team in India, preparing for Wal-Mart's entry, according to IGD.
"Wal-Mart typically targets developing markets with large-scale growth opportunities, and its move into India follows its rapid growth in China and Brazil," said McTavish. "Wal-Mart, however, only operates a very small number of franchised stores in its global portfolio, and today's news suggests that Wal-Mart has accepted the need to divert from its preferred operating model to establish operations in India. Wal-Mart will, however, benefit from Bharti's knowledge of the Indian market and the Indian consumer, to enable it to successfully tailor its proposition."
Wal-Mart established a sourcing operation in India in 2001, procuring home textiles, jewelry, and household items for its stores worldwide.
India's booming retail market, estimated at more than $200 billion, is currently dominated by more than 12 million mom-and-pop shops, according to the Associated Press.
While Bharti Enterprises is largely focused on the telecommunications industry, since 2004 it has operated FieldFresh, a joint venture with the El Rothschild group, which supplies fresh produce to overseas retailers, said IGD.