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Bharti, Wal-Mart Dissolve Franchise Agreement For Retail Business

Wal-Mart dissolve franchise agreement for retail business

Wal-Mart Stores Inc and Bharti Enterprises are breaking up their Indian joint venture and will own and operate separate businesses in the country, the companies said in a joint statement on Wednesday.

Bentonville, Arkansas-based Wal-Mart, the world’s biggest retailer, tied up with Bharti in 2007 and had been the most vocal proponent of prying open India’s restrictive retail market to foreign supermarket operators.

However, its growth in India has been hindered by still-evolving rules on foreign investment, an internal bribery probe, and, more recently, the faltering partnership with New Delhi-based Bharti, which Reuters reported in July.

Under terms of their breakup, Wal-Mart will acquire Bharti’s 50 percent stake in Bharti Wal-Mart Pvt Ltd, which runs about 20 wholesale stores in India under the Best Price Modern Wholesale brand, and will run the business independently.

“Given the circumstances, our decision to operate independently will be beneficial to both parties,” Scott Price, president and chief executive of Walmart Asia, said in the statement.

On Sunday, Price told Reuters in Nusa Dua, Indonesia, that its retail plans with Bharti were “not tenable” and that both sides were looking for the best way forward.

“Walmart is committed to businesses that serve our members and provide good returns for our shareholders and we will continue to advocate for investment conditions that allow FDI multi-brand retail in India,” he said in Wednesday’s statement.

Bharti, which is also the parent company of Bharti Airtel, India’s biggest mobile phone carrier, will acquire the compulsory convertible debentures (CCDs) held by Wal-Mart in Cedar Support Services, a company owned by Bharti.

Bharti Retail will continue to operate its easyday retail chain, which numbers 212 stores.

India last year allowed foreign supermarket companies to own up to 51 percent of their local operations, but no company has applied to enter Asia’s third-largest economy under the rule.

Wal-Mart said it will work with the government to create conditions that enable foreign direct investment in India’s supermarket sector.

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