MUMBAI: The world’s largest retailer Walmart Stores has invested Rs 1,328 crore in its India unit, signaling bullishness on the country despite breaking with its joint venture partner last year, internal inquiries into wrongdoing that may have been committed locally and a foreign investment policy that doesn’t have too many takers.
Walmart India, a new company it registered in January, issued and allotted more than 81 crore equity shares at Rs 16.35 each to its Bentonville-based parent as share application money worth Rs 1,328 crore, according to a board resolution it passed last week.
ET has reviewed a copy of the board resolution. The US company parted ways with Bharti Enterprises in October last year and decided to independently own and operate separate business formats in the country.
As part of the deal, Walmart agreed to buy Bharti’s 50 per cent stake in their six-year-old wholesale business that operates 20 Best Price Modern Wholesale stores.
The global retailer also terminated the franchise and supply agreements related to Bharti’s Easy Day retail stores. While overall expenses related to the India transaction are not available, experts feel that a bulk of the new infusion will go toward strengthening the back-end operations and online sales even as major store expansion has been frozen for some time now.
“Walmart would be using the money mostly for e-commerce and firming up back-end infrastructure as e-commerce requires an established and foolproof supply chain. Across the globe, Walmart is known for this and it would be no different in India,” said Ruchi Sally, director at boutique retail consultancy Elargir Solutions. “They would have paid Bharti for their stake by now.”
ET reported last month that Walmart was quietly readying a major e-retailing push in India with an electronic marketplace business model akin to that used by USbased Amazon and eBay.
A Walmart India spokesperson said it had no further comment beyond the information already disclosed. The US retailer had said in January that it would have to incur higher expenses related to its split with Bharti than earlier expected.
“The estimated charge for this transaction is now approximately $0.05 per share versus the previous estimate of $0.04 per share,” Walmart had said in a statement then.
Walmart’s store expansion in the country has been put on hold until early 2015 amid an ongoing internal probe to check if its local unit had in any way violated the US Foreign Corrupt Practices Act or FCPA that severely penalises American companies that indulge in corrupt practices overseas.
Overseas investors haven’t been enthused by India’s multi-brand retail policy, which they feel has too many riders attached and doesn’t apply uniformly across the country.