As per media reports, the global retailer Wal-Mart Stores Inc. (WMT) has called off its Indian joint venture with Bharti Enterprises amid legal issues. Last week Wal-Mart announced that the joint venture was ‘not tenable’ and it was reconsidering its future plans.
Accordingly, Wal-Mart will buy the 50% stake in the joint venture which to date operated approximately 20 outlets throughout the country. The giant grocer will now focus on wholesales operations. Henceforth, Bharti will run the stores independently under the Best Price Modern Wholesale brand.
Wal-Mart set foot in India in Sep 2012 when the country opened its doors to foreign direct investment (FDI) in the retail sector to untap the big and lucratic market of India with a huge population. Wal-Mart embarked on a project called ‘Jai Ho,’ a Hindi phrase meaning 'let there be victory.' It also planned to open 22 outlets in the growing Indian market with a prosperous and burgeoning middle class.
However, things were not very rosy for the giant retailer. Although the Indian government allowed foreign retailers to own a 51% stake in the country, it made it mandatory for the foreign retailers to buy at least 30% of their goods from small-scale and medium-sized local enterprises that had a capex value of less than $2 million.
The international players, including Wal-Mart, were not satisfied with this arrangement. Moreover, Wal-Mart had to suspend its chief executive officer of the Indian joint venture amid lobbying and bribing charges in India.
These hurdles proved to be unfavorable for the company in carrying out business in India and fulfilling its store opening target in 2012.
Wal-Mart currently carries a Zacks Rank #4 (Sell). Other retail-wholesale stocks worth considering are Safeway Inc. (SWY), Spartan Stores Inc. (SPTN) and Whole Foods Market (WFM). All these stocks carry a Zacks Rank #2 (Buy).
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