It is official now. Bharti Enterprises has joined hands with the United States' supermarket giant Wal-Mart to set up retail stores in India.
The two companies signed a Memorandum of Understanding on Monday under which they will jointly explore business opportunities in India.
On the sidelines of the on-going India Economic Summit, Sunil Bharti Mittal, Chairman, Bharti Enterprise said, "The retail shops will be owned by Bharti Enterprises under the Wal-Mart franchise and brand name. We will operate within the existing regulations."
Later speaking to Hindustan Times, Mittal said, "It is a vote of confidence for India. It is a big and significant project for us. We can bring down the price of commodities each day. Wal-Mart is known to offer value to consumers while providing profitable linkages to the producers and growers."
Mittal feels that by entering India ,Wal-Mart has shown that it is confident about the changes in regulatory framework that would occur soon, and the retail sector growing rapidly. A few stores will will be launched by mid 2007, and increased to several hundreds by the end of the year, he said.
In a joint statement the two companies said that Bharti, with its in depth knowledge of India's fast growing consumer market, and Wal-Mart, with its extensive global retail experience, share the same commitment to building relationships with producers in order to provide great quality at reasonable prices to consumers.
India's retail market, comprising both the organised stores and the traditional neighbourhood retail shops, is currently worth around $300 billion (Rs 13,50,000 crore), according to a recent PricewaterhouseCoopers publication.
The share of organized retailing, at present a mere three per cent is, however, growing at over 30 per cent annually. It is expected to be about 10 per cent by 2010.
Asitava Sen, specialist on the retail sector at PricewaterhouseCoopers said, "Wal-Mart's entry into India is a watershed development for Indian industry. It is not just the biggest retailer but also the largest company in the world."
But he pointed out that the regulatory framework would still be a challenge. "A multi brand company like Wal-Mart, cannot own a single share at the retail end, which is all that is presently allowed. Wal-Mart may appoint a franchisee for the front end and own the back end. This is the model it might adopt," said Sen.
Under current Indian regulations, 100 per cent FDI is permitted in wholesale cash-and-carry, 51 per cent in single brand retailing, and 100 per cent once again for products manufactured entirely within India.
While refusing to divulge any further details, Mittal said "The MoU is for equal stakes and we will operate in the areas where the government has allowed foreign investment in retail."
By 2015, according to an analyst at KSA Technopak, the Indian retail market will be $637 billion.
Mukesh Ambani, chairman of Reliance Industries Ltd, who recently ventured into the retail business himself said he looked forward to big changes in the sector.
Speaking to reporters on the sidelines of the India Economic Summit in New Delhi, Ambani said there was space for six to eight major players in India.
"The Indian retail market is entering an exciting phase. Sunil Mittal is a dear friend. We will together transform the Indian retail business by providing true value to customers and the sellers," he said.