Close to 20 properties identified by the retailer for its easyday stores have been returned, as partner Walmart grapples with regulatory issues and graft charges
Nearly five years after Bharti Retail rolled out its first easyday store in Punjab, Sunil Mittal's ambitious project appears to have come to a grinding halt. Having grown to over 200 outlets in five years since its launch in 2008, Bharti Retail has been unusually quiet on expansion this year, just as it has been for its cash-and-carry venture with American chain Walmart. This is in contrast to the fast-paced expansion by rival Mukesh Ambani's Reliance Retail which seems unmindful of the industry concerns over foreign investment norms in multi-brand retail.
That Bharti Retail returned close to 20 properties which were supposed to have been leased for its easyday stores, according to recent reports, has only added to the air of uncertainty around the business. Many in the industry dismiss the development as a routine event in the retail sector, arguing that "properties could be released without much heartburn when taken on a token amount with the condition that stores would open on a later date". That way the only thing one loses is the token amount. However, once the lease is signed, a lock-in period comes into effect, making it difficult to terminate the deal.
There's no clarity on the kind of deals that Bharti Retail may have signed for the properties in question. The company, in response to a questionnaire on its expansion plans and the reasons for the slowdown, says: "The retail industry is currently awaiting clarity around its suggestions to the government on the conditions linked to foreign investment in multi-brand retail. Once we have clarity, we will be in a position to spell out our future plans. Until then, it's business as usual at Bharti Retail and our joint venture with Walmart."
Business of few words
Unlike its listed telecom business, Bharti Airtel, Bharti's retail project has been a closely-held private affair as far as financial numbers and top management movements are concerned. Not surprising then that the last media announcement made by the company, as listed on its official website, was nine months ago on 3 November 2012 when it opened its fourth easyday store in Karnataka. This long spell of silence, according to an industry watcher, is a reflection of the company's current state of mind.
When Mitchell Slape, who was vice-president at Walmart's Mexico unit, was appointed chief operating officer (COO) of Bharti Retail in April 2012, again the company did not make any announcement. Not much is known about others in the top management, except that Bharti Retail has been functioning without a chief executive for long now, a scenario that is not quite in sync with the group's other key businesses.
Vinod Sawhney, a top executive, was given charge of the business as president and CEO when Bharti Retail, a subsidiary of the $12-billion Bharti group, was set up in 2007. Following Sawhney's exit a few years later, Andrew Levermore took over. Levermore returned to South Africa early last year to do his own thing and Slape was brought in as the COO.
In yet another step that may have raised many eyebrows, Rajan Mittal, Group Chairman Sunil Mittal's younger brother, who's been at the forefront of the retail business right from the start, stepped down as director of Bharti Retail last year, though he is still on the board of Bharti-Walmart, the cash-and-carry venture. Dismissing any link with the Enforcement Directorate probe in the $100-million investments by Walmart in alleged violation of foreign investment norms in Cedar Support Services, a Bharti group company, a spokesperson had said Rajan resigned from the Bharti Retail board because he wanted to "take out time for his other commitments". Rajan was replaced by Bharti group's general counsel and company secretary, Mukesh Bhavnani. Sunil Mittal, who too was on the Bharti Retail board when it was founded in 2007, stepped down as director in March 2008.
These developments should be seen in the backdrop of the uncertain regulatory framework that has kept multinationals from making investments even a year after foreign investors were permitted to enter the multi-brand sector. Bharti Retail is running in losses, it is learnt, and is a long way from breaking even.
In 2007, Bharti had announced a 50:50 wholesale joint venture with Walmart, while setting up its own retail business. The idea was to wait for the sector to open up to foreign investors, when perhaps Walmart could buy into Bharti's retail business. Walmart has been providing backend and technology support to Bharti Retail, apart from the fact that a Walmart veteran is running the company now.
Even as it's possible for Walmart to buy up to 51 per cent in Bharti Retail, as allowed in the policy on foreign investment in multi-brand retail, many hurdles have come in the way in the recent months, thereby throwing things into a disarray.
|GIVING UP ON GROWTH|
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