Wal-Mart chosen over Tesco for Indian retail deal

Wal-Mart, the world's largest retailer, has triumphed in its goal of entering the fast-growing Indian retail market, defeating UK rival Tesco to form a retail alliance with one of the country's largest business groups.

The US retailer's deal with Bharti Enterprises will form several hundred Wal-Mart branded stores across India in five years, says Sunil Mittal, Bharti's chairman. The investment would run into "billions of dollars".

"The retail shops will be owned by Bharti Enterprises under the Wal-Mart franchise," Mr Mittal said at a World Economic Forum conference in New Delhi. "The idea is to give Indians the lowest price every day."

Tesco, the UK supermarket operator, said last week it had withdrawn from long-running discussions with Bharti, one of the most plausible of several potential local partners.

"We've nothing against Tesco," said Rajan B Mittal, joint managing director of Bharti. "They know their job. But we felt Wal-Mart, on a big scale, was more of a fit.

"Nobody's dropped anybody. Both sides took a decision to mutually disengage."

Mr Mittal (46), whose elder brother Sunil founded the company in 1976, said the companies hope to sign in weeks an agreement about the amount to be invested and the number of supermarkets to be opened.

The memorandum of understanding said Wal-Mart and Bharti would "study and evaluate the retail market in India and identify business opportunities together within the existing guidelines".

Wal-Mart is expected to work around restrictive foreign direct investment rules, which prevent non-Indian supermarket groups from operating in the country except as wholesalers, by establishing a franchise arrangement with Bharti.

For Wal-Mart and other global retailers, India offers a potential ocean of untapped demand, rivalling China with a burgeoning middle class that is served by a fragmented and inefficient network of small family-owned stores.

In the past year, Wal-Mart has lobbied the Indian government to ease restrictions on foreign investment in the sector.

This year, it sold its loss-making operations in Germany and South Korea in an attempt to refocus its international efforts, which account for 22 per cent of sales.

Shares in Bharti, which is India's largest mobile telecommunications company with more than 30 million customers and a market capitalisation of about $26 billion (€19.8 billion), rose 2 per cent on the news of the joint venture, outpacing the overall market index.