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Bharti, Wal-Mart's India Partner, to Start Next Year

Tuesday, July 24, 2007

Bharti Group, Wal-Mart Stores Inc.'s partner in India, plans to open its first retail store in India by the middle of next year, more than six months after its initial target.

Bharti will have 200 large stores in the next seven years, group Chairman Sunil Mittal said in an interview in New Delhi on July 21. The 49-year-old billionaire is starting a retail chain after building India's biggest mobile-phone services provider.

The delay will make it tougher for Bharti to find the best sites to set up its shops as it competes with Reliance Industries Ltd. and Aditya Birla Group to grab a slice of the country's organized retail market. Sales through store chains may grow by more than eightfold to $97 billion by 2012, according to consultant Technopak Advisors Pvt.

"We are hiring people, looking at real estate and the back-end supply chain is being organized,'' Mittal said. "A lot of work is going on in that area.''

Rising property rentals and availability of good sites are the biggest challenge the company is facing, Mittal said.

Bharti's local rivals include Reliance, the country's most valuable company, and Pantaloon Retail India Ltd., the nation's largest publicly traded retailer.

Reliance, owner of the world's third-largest oil refinery, plans to invest about $6 billion in retailing. The company has more than 200 convenience stores in India. Pantaloon plans to invest $1 billion to increase its stores to 4,000 by 2010.

Store Chains

'Organized retail is just beginning to happen; we want to invest in areas at the start of the curve,' Mittal said. 'India is a very large country and you will need at least seven or maybe even 10 large retailers to cover the ground.'

Bharti plans to spend $2.5 billion on the retail network to compete with local competitors.

The proposed supply chain and wholesale joint venture with Wal-Mart is on track, Mittal said. In November, Wal-Mart agreed to form an equal wholesaling company with Bharti that will connect suppliers and retailers, with the Indian company owning the stores.

Overseas investment in India's retail industry is limited to single-brand merchants, preventing Wal-Mart and other international chains from buying stakes in local retail companies or setting up their own stores. Foreign companies are allowed to set up wholesaling ventures.

Wholesale Wal-Mart

Bentonville, Arkansas-based Wal-Mart is entering the wholesale market, anticipating India will ease restrictions on overseas companies running retail stores. The equal wholesale venture will supply to Bharti's retail outlets as well as neighborhood stores.

Bharti expects the retail unit will have sales of 200 billion rupees by 2015. Bharti Retail will set up supermarkets, hypermarkets and convenience stores and sell products ranging from food, electronics, clothing and furniture.

Posted by FR at 12:03 AM  


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