India’s Bharti conglomerate is in talks to tie up with global retailers Carrefour of France and Aeon of Japan, following the collapse of similar plans with US-based Walmart last year, according to two people familiar with the matter.
The news marks the latest twist in the long-running saga of global retail groups attempting to break into India’s potentially vast but fragmented retail market, only to find their efforts stymied by onerous regulatory complexities.
The talks suggest that Bharti, which is controlled by billionaire Sunil Bharti Mittal and operates the Easy Day chain of convenience stores as well as India’s largest mobile group, is reviewing its options in the sector following the aborted Walmart tie-up, analysts said.
Foreign players including Carrefour, Walmart and Tesco of the UK welcomed moves by India’s government to liberalise investment rules in 2012, allowing international groups to own 51 per cent of so-called “multi-brand” retail stores.
But the policy change has proven politically controversial, drawing strong opposition from local retail groups, while the investment rules came tied with complex conditions in areas such as the sourcing of local products.
As a result, no big foreign retailer has taken advantage of the liberalisation, while Walmart’s decision to scrap its joint venture was widely viewed as a signal that the policy had been a failure.
The topic has also provoked fierce debate within India’s current election campaign, with opposition leader Narendra Modi, who polls suggest may become the country’s next prime minister, refusing to confirm support for foreign retailers before the national election in May.
Such political debates mean a deal between Bharti and either Carrefour or Aeon is unlikely before the election, said one of the people familiar with the negotiations.
“These talks have been going on, but they are early, and especially after what happened before [with Walmart] nothing is going to happen until after the vote and we have clarity,” the person said.
Mr Modi’s opposition centre-right Bharatiya Janata party has so far formally opposed retail liberalisation, but last week Mr Modi signalled a possible shift in policy, saying that small retailers must learn to work with large modern competitors.
“In fact, I would say that if Mr Modi is elected, foreign retailers don’t have to fear India any more,” said Gurcharan Das, a business commentator who used to run the Indian operations of consumer goods group Procter & Gamble.
Bharti declined to comment on the talks, first reported in the Economic Times, an Indian business newspaper. Carrefour and Aeon could not immediately be reached.
One senior industry figure with knowledge of the discussions between Bharti, Carrefour and Aeon said any deal was unlikely to come soon.
“Carrefour have been linked with everyone in India for years, while Aeon have also been talking to people for a while,” he said.