There is little to be surprised about in the parting of ways between the Bharti group and Walmart from their joint venture. Walmart was increasingly chafing over the mandatory local sourcing norms for retailers which it said were impractical and impossible to meet. The joint venture for cash-and-carry wholesale business with Bharti was going nowhere with just 20 stores operational even as Bharti raced away setting up over 200 ‘Easyday’ retail stores independently. Not helping matters was the allegation of bribery and lobbying against Walmart, which is now under investigation. With the raison d’etre of the joint venture — setting up retail branded stores — falling through, the marriage was headed one way only: divorce. In the event, the separation seems to be in their best mutual interests. Walmart, which seems to have placed its retail ambitions in deep freeze, will now take control of the ‘BestPrice Modern’ wholesale cash-and-carry business where 100 per cent FDI is allowed, while Bharti is free to focus on its own retail business and possibly even look for other partners. With elections round the corner and the issue of FDI in retail being a contentious one, Walmart appears to have realised that the local sourcing norms are unlikely to be relaxed any time soon. And with the FDI norms allowing it full ownership of the wholesale business, it has chosen the next best option.
The Bharti-Walmart split is yet another example in a laundry-list of high-profile joint ventures that fell apart simply because the binding force was nothing more than mere expediency. In post-liberalisation India, local partners were sought out by foreign companies as ‘escorts’ to guide them through the maze of rules and regulations governing business in this country. With minor equity stakes in the joint ventures, the Indian partners got little in return, thus making the ventures unbalanced from the start. The one joint venture that was different was the one between the Hero group and Honda, which proved to be very successful but even this partnership split over conflicting ambitions of the partners. In the equal joint venture Bharti-Walmart, the Bharti group’s utility was in pushing through regulatory approvals, installing the back-end infrastructure including finalising store locations and in studying the market. These are not small competencies for a partner to bring to the table. Foreign companies seeking to do business in India, however, see these as necessary only till the business is established after which the partners are considered dispensable. The only way for Indian companies to combat this is to insist on technology transfer to the joint venture which will result in creation of intellectual capital within the country.
