Bharti in talks with realty majors on retail

Having made public its tie-up for a retail venture, the Bharti-Wal-Mart combine is roping in leading realty majors like DLF, Emaar MGF, and Ansals for handling the massive real estate requirements of the project.

The deal with these companies will be based on the arm's length principle , under which real estate will be primarily leased from the developers by Bharti-Wal-Mart.

The advantages of such an arrangement include a faster rollout and lower capex for the new venture, as well as higher asset utilisation for the real estate companies.

The combine is also planning to apply to the Foreign Investment Promotion Board (FIPB) to notify it of the wholesale cash-and-carry joint venture partnership, which intends to set up several hundred retail stores across the country from mid-2007 onwards.

While the broad thrust of the retail rollout has been discussed by Bharti-Wal-Mart, the minutiae will be finalised and known by January next.

Bharti Enterprises Chairman Sunil Mittal told Business Standard that while 100 per cent foreign direct investment in wholesale cash-and-carry business was allowed under the automatic route, the partnership would approach the FIPB as a measure of good faith.

"We are 1000 per cent in compliance with the rules and regulations governing the retail business. After all, policy cannot be made or changed only for one company. I am confident that no guidelines are being broken or violated in any manner (by the new venture)," he said.

Reiterating the need for allowing FDI in front-end retail, Mittal said the industry model for a large organised retail market required that this be done.

"Big retail has to happen. The government is clear on this and is supportive of any transformation attempts. There will be resistance for anything new, as the country has witnessed in the past, in telecom, airport modernisation, etc, but that is par for the course," he added.

Despite objections, there has been overall progress and those who were skeptical of reforms earlier acknowledge the progress that has been made since," he added.

On the fact that Reliance Industries has the first-mover advantage in the sector (the company launched its retail foray from Hyderabad last month), Mittal said, "Reliance's entry is good for the consumer. There is space for multiple players and the benefits will be felt across the board with time."