NEW DELHI (AP) — Retail giant Wal-Mart Stores Inc. has joined with an Indian company to set up hundreds of stores in a move that promises to transform the country’s vast retail market, one of the world’s fastest growing.
Wal-Mart’s alliance with Bharti Enterprises Ltd. — a business conglomerate focused largely on telecommunications — appears to be prompted by a need to get around restrictions on foreign companies, which are barred from operating multiproduct retail chains in India.
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.
Mr. Mittal said the deal complies with existing Indian rules.
He declined to divulge the financial terms of the deal, but said it “will be a partnership of equals.”
It wasn’t immediately clear whether Wal-Mart had given up plans to set up its own stores in India, where resistance from political groups and domestic businesses has prevented the government from allowing foreign companies to operate multiproduct retail chains.
Global retail giants such as Wal-Mart and Germany’s Metro AG have been lobbying the Indian government for years to open the country’s retail sector, which is growing 30 percent annually.
“Wal-Mart was keen to get into India. I think they have chosen the right partner,” said Mr. Mittal, whose group company Bharti Airtel Ltd. is the country’s largest cellular phone service provider with more than 30 million users.
The deal marks the Indian company’s first foray into the broader retail market and signals its desire to diversify into new areas of business.
The alliance will allow Bharti Enterprises to leverage Wal-Mart’s experience and its brand value, said Nikhil Garg, an analyst at Bombay brokerage Edelweiss Securities. Mr. Mittal is also cash-rich and has the capacity to scale up quickly, he said.
“It is going to be a large investment. … We are going to be a big player in this market,” Mr. Mittal said.
It would take several months before the first store opened its doors.
“My own wish is August next year,” Mr. Mittal said. Eventually, there will be “several hundred stores across the country [that] will probably carry both brand names.”
The announcement came as business leaders from around the world were meeting in New Delhi to debate the opportunities and challenges facing India’s booming economy, which is growing at more than 8 percent annually.
India’s booming retail market, estimated at more than $200 billion, is dominated by more than 12 million mom-and-pop shops. Large air-conditioned stores remain a rarity.
Sales through company-owned network stores — also called organized retailing — currently total about $8 billion, or less than 5 percent of the market.
Rising middle-class incomes and an increase in demand for branded products, however, make India a compelling destination for global retail companies.
From India’s point of view, growth of organized retailing could help generate new jobs and create a virtuous cycle of prosperity, especially among people in rural areas, said Mukesh Ambani, chairman of Reliance Industries, a leading Indian business group that recently entered the retail trade.
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