Raj Jain wears two hats, as President of Walmart India and Managing Director & CEO of Bharti Walmart, the cash-and-carry joint venture. In an interview with Business Standard, he dwells on the points raised by a government discussion paper on allowing foreign investment in multi-brand retail, and discusses plans on cash-and-carry. Edited excerpts:
Have you started preparing the blueprint for rolling out Walmart India stores, now that the government has released the discussion paper?
It is still a discussion paper. But it does prepare sufficient ground for entry into multi-brand retail, with a very relevant tone and tenor.
Is majority holding in the Indian venture a pre-condition for Walmart’s entry into the market?
No. Our position would be that the government should open it fully (allow 100 per cent foreign investment). However, we fully understand that the government wants to adopt a calibrated approach, as it has in other industries such as telecom. We are willing to work with the government and demonstrate the benefits of modern retail to the country
Will you be comfortable with less than 26 per cent stake, given the rules in India?
Allowing less than 26 per cent is like not opening at all. Shareholding below 26 per cent does not give any rights. I am sure the government is cognizant of that. The question will be between a 100 per cent, a 51 per cent and 49 per cent and, may be, 26 per cent. But nowadays, the difference between 26 per cent and 49 per cent is hardly anything.
On a calibrated approach, the government also wants multi-brand retail chains set up through the help of foreign capital to open stores only in cities with a population of one million or more. Is such an approach an impediment?
Yes, it is. There are only 42 or 43 cities above the one million mark. So, it reduces the landscape to a significant level. One million is a very high number. Also, getting real estate in these large towns is a big challenge. Once you develop a back-end infrastructure, which the government wants us to do, then you have to spread it in the same geography, as much as possible, because India is a very large country. Our own preference and recommendation would be 100,000. If that is considered too low, then 500,000 is probably a good number.
Is it a good idea to give you rights to operate in certain states, say, Punjab, Haryana and Delhi, which will be like a circle in case of telecom?
It makes business sense. Walmart may want to do things in the North, while our competitors may want to focus on the South. But I don’t know if it makes legislative sense, because we are not a federally-run country. We need to have the same law for all states. A regional approach makes better sense because it is very difficult to develop infrastructure everywhere: it takes a lot of time, effort and money to do it.
There is also a suggestion in the discussion paper to put in place some norms on sourcing. Is that an impediment, too?
For our current businesses of supply and cash-and-carry, we are sourcing almost 90 per cent of our products locally. So, it’s not that it’s a big issue. It also helps develop the local supply base, not just for India but global.
There is a suggestion to allocate half the inflow in creation of infrastructure. In the initial years, do retailers like you invest more or less than what has been suggested?
In the initial years, it could actually be higher. It depends on the country and the level of infrastructure. In India, infrastructure is relatively not so developed. So, 50 per cent or thereabouts would probably be a good figure. But rather than mandating investment in the back-end, the government could look at some other parameters also, to ensure serious players are there in the market. It is a bit like opening the auto industry: you don’t direct that you have to necessarily put factories. You can’t make an automobile without a factory and you can’t run an automobile business without a factory. Whereas, a lot of attention gets focused on front-end stores, no global retailer can be successful unless it has a very strong back-end.
What do you make of this suggestion in the discussion paper that retailers may be asked to seek permission from a central regulator for opening every outlet? Doesn’t it look like macro-management?
I don’t think it will work in our country. It is like going back to the 1940s or the fifties. A central regulator is not required. For opening any store, there are 30 licences required. Those are, by-and-large, given by the state government. So, it should be mandated to the states to put in place an appropriate regulatory mechanism, a single-window one.
As a global player, don’t you also want comfort from the states that they will not clamp down on certain chains or on organised retail as a whole?
Yes, of course. But as we have seen in manufacturing and other sectors, states which do discourage modernisation, foreign investment or progress, tend to suffer and those governments probably do not stay in power for too long. The democratic process will take care of this. We don’t need any specific assurance to that effect.
How many cash-and-carry stores should we expect from you in the coming months?
We will open about 10-12 cash-and-carry stores in the next 12 to 18 months. Work is under way on all these sites. These will be all over the North and some in the South.
How much revenue have you started generating from India?
It’s very difficult to say.
Has your total sourcing from India reached the $1-billion mark yet?
No, not yet.
