With Carrefour virtually out, Bharti Retail revives JV talks with Japan's Aeon Group
Carrefour India Managing Director Jean Noel Bironneau downplayed reports of an exit from the country, although the French supermarket giant is said to have dropped out of talks with Bharti Enterprises, in turn prompting the Sunil Mittal-owned group to resume negotiations with Japan's Aeon Group, according to people familiar with the developments.
Bironneau told employees "not to pay attention to rumours and focus on business" during a routine Friday gathering. The latest assurance to Carrefour's staff comes as Bharatiya Janata Party leaders Rajnath Singh and Arun Jaitley have been airing their strong opposition to overseas investment in multi-brand retail.
BJP, led by its prime ministerial candidate Narendra Modi, will be well-placed to form the next government after the ongoing election, according to opinion polls. The UPA government had freed up the retail foreign direct investment (FDI) policy in the face of intense political resistance in 2012.
Talk of Aeon's interest in Bharti reviving came amid a visit by a team of executives from the Japanese company last weekend to Bharti Retail's office and stores in Gurgaon. Bharti is keen for a tie-up with a foreign partner following its alliance with Walmart Stores Inc falling apart in October.
"The signal we have been getting is we need to grow the business for which we will take money from any credible source," said an executive at the Indian company, who asked not to be named. The talks between Bharti and Carrefour didn't make headway because of differences over possible terms of any deal, this person said.
French company curtails orders to vendors
A Bharti spokesperson declined to comment. An e-mail sent to Aeon did not elicit any response at the time of going to press.
The Tokyo Stock Exchange-listed Aeon runs several retail chains including supermarkets, convenience stores and malls in its home country. Aeon operates in other Asian countries such as China, Cambodia, Thailand, Vietnam and Indonesia. In India, Aeon is possibly talking to Bharti for a cash-and-carry venture that could be similar in structure and agreement to what it had with Walmart before the split, according to sources.
The anti-FDI stand taken by the BJP leaders appears to have prompted Carrefour to go slow in the country until there's more clarity on the policy after the new government takes office. After another two rounds of voting on May 7 and 12, counting takes place on May 16.
"Every foreign retailer is concerned about the likely scenario and it is same for us. Therefore, we are not talking of any expansion at present," said a senior Carrefour employee who did not want to be named. Frank Kenner, regional director for Carrefour in India, declined to comment.
This comes as the French retailer infused .`160 crore in its India subsidiary in December after having invested about .`300 crore since its entry into India's cash and carry segment in 2010. India allows 100% FDI in this segment and while the BJP statements relate only to multi-brand retail, foreign retailers are understandably nervous about what could happen, an employee said.
Carrefour India reserves the first or last Friday of every month to celebrate birthdays of employees.
Bironneau's response came at such a gathering at its Gurgaon office on Friday when employees peppered him with questions about the reports that said the company was preparing to exit India and could start laying off people in the coming months. Bironneau sought to allay their fears, saying he was happy with the performance as same-store sales in India had grown over the past year.
"He said that our stores have performed better over the last one year," said the employee cited above, who was present at the gathering. "The MD said we should rather focus on our business and said it was business as usual for us."
However, the company has curtailed orders to vendors due to the uncertainty of the current political situation, according to the CEO of a retail company, citing the example of the Carrefour store in Seelampur in Delhi that clocked .`23 crore sales in April alone. The CEO of another retail firm said employees at the Jaipur store have been asked to look for jobs and some of them are even protesting against the move.
Cash-and-carry retailing involves ventures that sell only to other businesses and not directly to consumers. Such businesses do not compete directly with the country's millions of mom-andpop stores that the BJP wants to shield. The French company operates five Carrefour-branded cashand-carry stores in India and had been in talks with Bharti Enterprises for a possible alliance after the latter's split with Walmart.