The probe by India’s finance ministry that alleged Wal-Mart violated stringent foreign investment protocol has cleared the retailer, according to multiple reports out of India early Thursday morning (Oct. 17).
The officials familiar with the investigation told the Wall Street Journal it is now finished, and the finance ministry has concluded that the deal between Wal-Mart and Bharti was in line with the central bank's rules and other regulations enabling indirect investments at the time.
A Wal-Mart spokeswoman said in an e-mail Thursday, the company had cooperated with the government agencies during the probe. "We are in compliance with India's FDI guidelines,” she noted.
Wal-Mart said last week it is dissolving its joint venture with Bharti, and going its own way as it will operate 20 wholesale cash and carry stores, a business it plans to grow independently of Bharti. Likewise, Bhari will operate its retail supermarket chain Easyday, as it splits with Wal-Mart.
The decision is important for Wal-Mart, who will try and organically build its business in country, investing in supply chain and farm / supplier relationships for the long-term.
The Indian market is ripe with potential as consumers spend more than $400 billion annually. But the country is largely dominated by mom and pop shops, which Wal-Mart can serve with its Best Price wholesale cash and carry business.
Doug McMilion, CEO of Walmart International. said Tuesday (Oct.15) that Wal-Mart was resetting its business in India amid ongoing rule changes in-country with regard to foreign investment.
He said the new rules made it difficult for Wal-Mart and Bharti to collaborate, given that individual states now have to approve foreign investment ventures and multibrand retail. McMillion said splitting the retail and wholesale businesses was the best option for both parties.
He said Wal-Mart likes India and plans to invest in its wholesale business and some day will apply for a license to add retail as it continues working with government’s rule changes.