Bharti says no hitch in Wal-Mart JV

Updated on May 25, 2007 04:37 PM IST
Bharti Group rejects media reports that a wrangle over branding had delayed a deal with Wal-Mart Stores Inc for a cash-and-carry joint venture.
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Reuters | By, New Delhi

India's Bharti Group on Friday rejected media reports that a wrangle over branding had delayed a deal with Wal-Mart Stores Inc for a cash-and-carry joint venture.

Bharti Group Managing Director Akhil Gupta said in an interview the two firms were still discussing business plans for the venture and a deal was just a matter of time.

"All I can say is it's on track and there is absolutely no hitch. It is just a matter of time," said Gupta, seen as the key architect in building billionaire Sunil Bharti Mittal's business empire that includes Bharti Airtel Ltd, India's top mobile phone firm.

"It's not just signing the agreement, there are a whole lot of other things - discussions, business plans, other things simultaneously going on. So I don't have an exact date," he said.

Bharti and Wal-Mart aim to set up an equal joint venture for cash-and-carry business in India's fragmented $300 billion retail industry, which is dominated by small family-run stores and is forecast to more than double in size by 2015.

Bharti has also set up a wholly-owned subsidiary that will spend $2.5 billion by 2015 to build hypermarkets and supermarkets and compete with Reliance Industries, India's most valuable firm, metals giant Aditya Birla group, the Tata group, Pantaloon Retail and ITC Ltd.

Gupta said branding for the retail chain had not yet been decided.

"For the joint venture, we would have the Wal-Mart name, for retail let's see what market research shows. It has not yet been decided."

Local media has reported Wal-Mart is prepared to lend its brand name only to high-profile stores in large cities, not in smaller towns.

"All these are matters of discussions which are happening. I do not know whether it will work like that because either you have it or you don't have it," Gupta said.

He also declined comment on a report in the Economic Times on Thursday that said Wal-Mart was negotiating for a possible association or strategic stake in Indian logistics firm Radhakrishna Foodland.

"We do not comment on such speculation," he said.

Gupta said India's retail market would be highly competitive and soaring real estate cost was a big challenge.

"It will be a low-margin business. It is a volume business. Internationally, (margins) are in no case in double digits. I don't see any reason why in a competitive environment it should be different in India."

He said real estate costs in major cities were enormous, even by international standards.

"That always is a big challenge because rent starts constituting a very significant portion of your revenue and cost. So if that goes beyond a certain level, it becomes uneconomical to open stores in certain areas."

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