|Mittal (top), Ambani
New Delhi, Nov. 27: Mukesh Ambani may one day get to build the Wal-Mart of India but old telecom rival Sunil Mittal has clinched a deal to bring a slice of the real thing to the country.
Wal-Mart, the world’s largest retailer, and Mittal’s Bharti Group will launch a retail joint venture in India on August 15 next year.
“Wal-Mart will be our joint venture partner. It is a partnership of equals. Big investments are in the pipeline. We are talking here about several hundred (stores) across the country. We are going to be a big player in the market,” Mittal said today.
The nuts and bolts of the deal are still being put in place. Bharti is expected to manage the front-end operations of the store, while Wal-Mart will take care of back-end nitty-gritty like technology, supply chain and logistics.
The joint venture will revolve around cash-and-carry (wholesale deals), logistics, supply chain and technology.
The agreement “allows the two companies to study and evaluate the retail market in India and identify business opportunities together within the existing guidelines”, a statement said.
Rules governing foreign direct investment in retail, a controversial issue, permit 51 per cent stake in only single-brand ventures.
Wal-Mart is a chain of department stores that sells many brands. But it can form a joint venture with Bharti as foreign investment is allowed in back-end operations.
For front-end retailing, a foreign company can lend its name and have technical collaboration but no equity tie-up. There are no explicit rules forbidding the use of logos either.
The deal is expected to add a formidable edge to Bharti’s ability to take on the Reliance retail chain, which Mukesh wants to make the Wal-Mart of India.
Mukesh, who built Mittal’s Airtel rival Reliance Infocom — now run by brother Anil — welcomed the Bharti deal and said the Indian market has space for at least six to eight large players.
Other retailers, like Pantaloon and Shopper’s Stop, too, sounded unfazed but all are beefing up operations. Analysts said consumers would benefit the most through more choice, international quality and lower prices.