Multiple reports out of India indicate Wal-Mart’s investment in Bharti is under scrutiny by the commerce ministry and the Reserve Bank of India.
Wal-Mart spokeswoman Megan Murphy noted in an email to The City Wire today (Oct. 18): “We are in complete compliance with India’s FDI [foreign direct investment] laws. All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India.”
The commerce ministry did confirm it had received a complaint that was forwarded to the Reserve Bank of India for investigation, which is routine protocol. Though the ministry says it has not ask for a formal probe into the matter at this point.
The investigation into Wal-Mart’s relationship with Bharti was prompted by a letter last month to the prime minister of India from a vocal lawmaker that opposes foreign investment in retailing and many other industries.
News sources say the regulators are looking into the near $100 million investment Wal-Mart Stores made in Bharti Retail, which operates more than 200 supermarkets across India. The deal was made at a time when India restricted investments in the retailing industry to a 51% ownership.
The foreign investment rules were recently expanded and Walmart Bharti has already said it will be adding more stores within the next 18 months.
Wal-Mart has made no bones about wanting more access to the populous country in recent years -- ripe for investment with 1.2 billion consumers. The mega retailer continues to work with its business partner Bharti in store expansion throughout the country.
The company has a 50-50 joint venture with Bharti that operates 17 wholesale stores selling to other businesses, and it also provides logistics and management services to Bharti’s Easyday retail stores.
New agencies pounced on the allegations because the retailer is already involved in a widespread investigation stemming from bribery allegations in its Mexican business unit.
Wal-Mart has vowed to get to the bottom of those allegations and promptly deal with those involved in any wrongdoing saying it has zero tolerance for corruption.
Meanwhile Wal-Mart stock continues to break new ground hitting a 52-week high of $77.60 on Wednesday (Oct. 17). Shares are trading slightly lower today at $76.53, down 50 cents from the opening.