Thursday, September 27, 2007

Wal-Mart and India: Big

Events are happening in India with Wal-Mart (WMT) that folks seem to be not noticing and if you are buying shares to accumulate, that is good because once the scope of this is recognized, shares may never look back.

Bharti Enterprises and Wal-Mart are confident their Indian joint venture is supported in the country and say it will help usher in the future of Indian retail. "I think it's a big change for India, the move from mom-and-pop to organized retail," said Raj Jain, head of Wal-Mart's India operations. "I think most people understand that it is a necessary evolution which has to go through for everybody to benefit from and for the economy.

Bharti Chairman Sunil Bharti Mittal echoed those comments. "Farmers want this, the customers want a better experience and to save money. They want it -- which means the country wants it."

The joint venture called Bharti Wal-Mart Private Limited, is scheduled to open its first store by the end of next year. It will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses.

The question is, what is the potential? Consider that large retail companies make up only 3% of India's $350 billion retail market. India allows foreign single-brand retailers to hold up to 51 percent in local joint ventures, while multiple-brand retailers like Wal-Mart are limited to cash-and-carry and franchise deals.

Wal-Mart is in good company and has strong support internationally as suppliers ranging from Unilever (UL) and Procter & Gamble Co (PG) who "know the game", to small local suppliers that make only one product are eager to work with the joint venture, Mittal said.

In essence, Wal-Mart is positioning itself to be the portal for goods going into the country. Once the JV is operating, the economies of scale Wal-Mart and distribution abilities can and will employ will instantly transform them into the preferred retailer for the nation. International sales for Wal-Mart are growing 16% this year and this partnership will cause that to explode.

It is a year out which is why is not getting much notice now. The thing is, if you wait until it does, you will be paying much more for a share of that growth than you are now.


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