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Bharti does not seem to have made windfall gains from selling its 50% stake in wholesale business joint venture to its former partner Walmart for $100 million, said consultants and bankers.
In October last year, both Bharti and Walmart announced that they are calling off the six year old JV, and said US retailing giant would take over Bharti's 50% stake. Besides, Walmart also ended joint venture, franchise and supply agreements for With Bharti Retail for Easyday stores.
Besides amount paid for cash and carry stake, Walmart, in its latest annual report, said it had written off debt and other investments in retail business (Bharti Retail) to the tune of $234 million (around Rs 1418 crore) and recored a net loss of $151 million.
"Bharti also made equal investment in the JV and some of the money must have been written off because of losses. On the whole, it (valuation) does not look to be high and does not mean Bharti has made windfall gains," said Arvind Singhal, chairman of Technopak Advisors.
"Walmart wrote off the debt because both parties wanted to run business independently and not use each other's assets. So any one party should have used the assets," Singhal said.
Added an investment banker who did not want to be quoted: "What Walmart bought was phisical infrastructure. What they bought was warehouses, trucks and stores. I think they have paid a descent price for the assets. They have been involved in the business since the beginning and known everything inside out," said the banker
Walmart runs 20 stores in the country under Best Price Modern Wholesale stores and Bharti runs over 210 stores under Easyday brand.
During the time of calling off the JV, both parties said Bharti would acquire the compulsorily convertible debentures (CCDs) held by Walmart in Cedar Support Services. This investment became controversial issue as it was probed by Enforcement Directorate for alleged violations of the Foreign Exchange Management Act (Fema).
The world's largest retail chain sacked many top executives in India including its CFO after allegations of it violating Foreign Corrupt Practices Act (FCPA), or anti-bribery laws, across markets like Mexico, India, Brazil and China.
In mid-2013, its CEO Raj Jain quit, in a sudden development of events.
Lately been in the middle of several controversies, including an internal investigation into violations of the Foreign Corrupt Practices Act (FCPA), or anti-bribery laws, across markets like Mexico, India, Brazil and China.
As a fallout of that probe, Bharti-Walmart CFO Pankaj Madan, besides four others from the legal team, had been sent on leave. A source said the investigation might have been completed now, and many more heads might roll as part of a clean-up act. This information could not be independently verified.
The companies have also decided to settle the controversial issue of Walmart's $100-million 2010 investment made in Cedar Support Services, a company owned and controlled by Bharti. This investment is being probed by the Enforcement Directorate for alleged violations of the Foreign Exchange Management Act (Fema).
The statement said Bharti would acquire the compulsorily convertible debentures (CCDs) held by Walmart in Cedar Support Services. Recently, Walmart had sought a one-year extension for converting the debentures into 49% equity in Bharti Retail, beyond the deadline of September 30, 2013.
