The Bharti-Wal-Mart alliance in the retail sector is set to be signed and delivered in the next few days. Sources close to the development say that an announcement could take place within 48 hours.
When contacted by ET, Bharti chairman Sunil Mittal confirmed that discussions between his group and the UK retail chain Tesco for a retail alliance have been terminated. “We have decided to disengage from the discussions.
I have great respect for Tesco and believe that it is a great company. But we have found a partner with whom there is a greater strategic fit. We will announce our plans this week,” said Mr Mittal. It is learnt that Mr Mittal flew down to London and communicated this decision to Tesco on November 22.
While Mr Mittal is yet to officially name Wal-Mart as his partner, sources close to him say that the world's largest retailer is the chosen one and discussions are in the final lap. Sources say the alliance will be a holistic one covering cash & carry operations, logistics, and retail.
While current government regulations permit FDI in cash & carry and logistics, it is banned in front-end retail. Therefore, it is expected that while Wal-Mart will invest in the cash & carry and logistics businesses, there could be a franchising agreement in the retail sector. Both the partners will jointly decide on a brand name.
Sources say that while Bharti and Wal-Mart had been in talks for a while, discussions between the two gathered momentum and intensity in September. As a matter of fact, Bharti and Tesco had almost decided to announce an alliance on October 10, but the feeling in the Bharti camp is that Wal-Mart moved faster than Tesco.
It is said that the royalty and investments offered by Wal-Mart is far higher than that offered by Tesco and it could provide the scale and pricing to the alliance that other retailers can not.