After six years, Wal-Mart is buying out Indian retailer Bharti Enterprises, leaving the world's largest retailer without a partner to help establish supermarkets in the country Bloomberg Businessweek reported.
"We are currently working with Bharti to finalize the terms of the agreement and transition arrangements," Wal-Mart said in a statement. "If and when we reach a definitive agreement on transaction terms, we will provide further financial information as appropriate."
While the news provides a further setback for the retailer growing in India, it gains full control of 20 wholesale stores and their supply chain.
"Wal-Mart will likely continue to focus only on the wholesale business now," Dhvani Bavishi an analyst at brokerage ICICI Direct in Mumbai told Bloomberg Businessweek. "They may start focusing on the retail venture probably after the elections next year."
Although the country allows foreign retailers to own wholesale operations, they are required to team up with Indian retailers to establish retail stores, which Wal-Mart has none of. Wal-Mart opened its first wholesale store in May 2009 in India's northern city of Amritsar in a deal where only businesses with valid sales tax documents are allowed to shop after becoming members.
Since it will be standing on its own, Bharti plans to open its own chain of wholesale stores, Bloomberg Businessweek reported. However, both companies currently own 50 percent shares in the deal.
Bharti is also expected to buy Wal-Mart's compulsory convertible debentures or debt instruments in the firm's Cedar Support Services. No value for the transaction has been announced. The two partners are now likely to become competitors.
Wal-Mart's successes as a retailer in India have experienced a lot of adversity over the past few months. The dilemma's started with Raj Jain, a Wal-Mart top executive, and main component of the retailer's successes in India, who left the company in June because of potential government and internal investigations. Jain also left Wal-Mart, seven months after the venture's chief financial officer was suspended.
