U.S. News

Wal-Mart's India Partner to Invest $2.5 Billion


India's Bharti Enterprises plans to invest up to $2.5 billion in setting up a nationwide chain of supermarkets and retail shops in partnership with U.S. chain Wal-Mart , a top executive at the Indian company said Monday.

The investment will be spread over the next eight years and create jobs for about 60,000 people, Bharti's Joint Managing Director Rajan B. Mittal told reporters.

"The company has planned an investment of $2 billion to $2.5 billion by 2015," Mittal said.

After years of lobbying the Indian government to allow foreign investment in multibrand retail stores, Wal-Mart entered into a deal with Bharti Enterprises late last year to get around the restrictions and access the country's booming retail business.

Under the deal, the U.S. retail giant 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.

The agreements for the joint venture and the franchise will likely be finalized when Wal-Mart Vice Chairman Michael Duke visits India later this week, Mittal said.

But Mittal declined to divulge the details of the agreements.

Wal-Mart Stores hasn't said how much it would invest in the proposed India venture. It is also not clear if the stores will be allowed to display the Wal-Mart brand.

India currently bars foreign companies from setting up multi-brand retail store, but allows them firms to operate facilities to procure goods for overseas sales.

So far, the Indian government has not raised any objection to Bharti's deal with Wal-Mart, but Industry Secretary Ajay Dua said last week that the final agreements would be subject to scrutiny.

The deal has sparked criticism from the government communist allies, which described it as a "backdoor entry" for the U.S. retail chain into India's protected retail business.

The retail market -- estimated at about $200 billion per year -- is currently dominated by more than 12 million mom-and-pop shops.

Selling through company-owned stores -- also called organized retailing -- currently totals just $8 billion, but rising middle-class incomes and an increase in demand for branded products are driving a retail surge in India.