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Wal-Mart, Bharti deal under probe on FDI norms violation

HT Correspondent, Hindustan Times  New Delhi, October 12, 2012
First Published: 20:39 IST(12/10/2012) | Last Updated: 01:39 IST(13/10/2012)

Wal-Mart's investment in Bharti Retail has come under the scanner amid allegations that the world's largest retailer might have entered India's front-end multi-brand retail business two-and-a-half years before the government actually lifted the ban on foreign investors.


Last month, the government allowed FDI upto 51% in multi-brand retail triggering howls of protest.

The Prime Minister's Office (PMO) has forwarded to the department of industrial policy and promotion (DIPP), an allegation by CPI Rajya Sabha member MP Achuthan that raised specific questions on Wal-Mart's R456-crore investment in a company called Cedar Support Services through compulsorily convertible debentures (CCDs) in March 2010.

Convertible debentures are instruments through which an investor exchanges funds, which it had lent, into equity or shares at later date, thus making them legitimate shareholders.

Since these are unlisted companies, disclosure norms aren't as stringent as these do not come under the Securities Exchange Board of India (SEBI).

Documents accessed by HT show that Cedar Support Services (earlier Bharti Retail Holdings) was carrying out multi-brand retail business in India through a 100% subsidary, Bharti Retail, which operates front-end retail stores under the brand name Easy Day. In December 2009, the articles of association of the company were amended enabling it to provide real estate consultancy services.

Four months later in March 2010, Cedar issued CCDs worth Rs. 456 crore to Wal-Mart Holdings.

Commerce and industry minister Anand Sharma, in a written reply to Rajya Sabha on September 6, 2012, said that as per Cedar Support Services, upon conversion of the debentures after 30 months or September 29, 2012, Wal-Mart  Holdings will have 49% equity in it. Sharma told Parliament that the Reserve Bank of India does not have any record of FDI in Cedar.

While Wal-Mart did not respond to HT's questions for several weeks, a Bharti spokesperson said on Friday, "We are in complete compliance of all regulations. All details have been shared with the relevant authorities."

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