India’s Bharti Enterprises Pvt., which six months ago ended a tie-up with Wal-Mart (WMT:US) Stores Inc., is in talks with France’s Carrefour SA (CA) and Japan’s Aeon Co Ltd. for two separate joint ventures, according to one person familiar with the discussions.
Bharti, owned by billionaire Sunil Mittal, is in the final stages of discussions with Carrefour to form a venture that would run wholesale stores, the person said. Aeon is in talks to take a minority stake in the Bharti’s supermarket business, which operates 210 Easy Day stores, the person said. Another person familiar with Aeon’s strategy said talks with the Indian retailer were ongoing. Both officials asked not to be named as they aren’t authorized to speak to the media.
India’s retail market is projected to be worth $865 billion by 2023 according to consultant Technopak Advisors Pvt, and Carrefour is considering ways to expand in the nation, Chief Executive Officer Georges Plassat said March 5. Bharti’s discussions suggest a strategy to attract foreign investment while staying within the bounds of India’s laws governing supermarkets, which may change after a new government is sworn in next month.
The favorite Bharatiya Janata Party, which is leading polls to form the next government, has said that if voted into power, it would block foreign investment in super markets.
Bharti Group spokesman Prem Subedi declined to comment in response to an e-mailed questionnaire. Bharti Retail Chief Executive Officer Raj Jain also declined to comment on both the Aeon and Carrefour talks.
Aeon spokesman Yohsei Honda and a Carrefour spokeswoman declined to comment on the talks.
Carrefour currently operates five wholesale stores in India. These are known locally as cash-and-carry stores and are subject to less regulation than supermarkets. Cash-and-carry outlets primarily target small shopkeepers and traders, who need to be registered members to shop there.
The Carrefour stores would be transferred to a partnership with Bharti, the person familiar said. Bharti would also convert some of its existing large supermarkets into the cash-and-carry format, the person said.
Rival Wal-Mart which got sole control of the cash-and-carry locations after the Bharti partnership ended last year, said last week that it plans to add 50 stores over the next four or five years. The world’s biggest retailer now runs 20 such stores in the country.
Reliance Retail Ltd., controlled by India’s richest man Mukesh Ambani, is the newest entrant in the cash-and-carry business, and has 25 outlets operational, according to a spokesman. Germany’s Metro AG has 16 in the nation.
Bharti already has identified at least 50 sites for future stores and these would be opened if deals were completed, the person said.
Aeon conducts some financial business in India now and doesn’t currently have a retailing presence in the nation.
India’s regulatory regime makes it “a very complex, challenging” environment for retailers, Carrefour CEO Plassat said on a March 5 conference call.
“We have a small business in India,” Plassat said then. “It doesn’t bring any losses or gains. But the true challenge is to know how to tackle India for the next 20 years.”
India’s Economic Times newspaper reported today that Bharti was close to a tie-up with Carrefour, and it reported about Bharti’s talks with Aeon (8267) on March 7.
Jerry Black, Aeon’s senior executive vice president said in June last year that the company had contacted “many people” in India about potential ventures.
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