Bharti-Walmart: BMR Advisors calls for a liberal FDI policy

Vivek Gupta of BMR Advisors does not feel that the current FDI policy is economically feasible. This comes on the back of Walmart’s statement that the current policy for foreign direct investment (FDI) led to the break up of its joint venture (JV) with Bharti Airtel. Much significant multi-brand retail investment (MBR) till 2014 elections is not expected, he says.

However, he is optimistic on the fact that the policy at least opened doors for MBR in India. The government policy has to be more liberal going forward, he tells CNBC-TV18 in an interview. Also read: Walmart blames FDI policy for split, Bharti disagrees Below is the edited transcript of his interview to CNBC-TV18. Q: Walmart, in its response to our queries, said that one of the factors responsible for this decision was the FDI policy. Do you agree or does this have more to do with Walmart's discomfort with the controversial legacy in India? A: I wouldn’t want to speculate on what the specific factors were that drove Walmart to this decision. Breakup of a JV is a complex matter and there are many factors that go into it. May be if the FDI norms were easier, parties would have found a way to invest more money into the business and the JV would have continued. Without commenting on the specific factors, the multi-brand retail guidelines and the way that they are framed do not necessarily offer foreign retailers the comfort to operate in a seamless manner. I can understand the reasons why the government needs to frame the policy in the way that it has, but the current policy seems to be economically not feasible. Other political parties have not come out in support of this policy has also acted as a dampener. Till after the 2014 elections, when we have a new government and we have more clarity from the government on how it sees multi-brand retail, we don’t see significant multi-brand retail investment happening. Q: There is some relief for the government that Walmart has not decided to pack its bags altogether and walk out. They have decided to stay invested in the cash and carry business and go it alone. Do you see players like Metro, Walmart making any investments given the uncertainty? A: People who have established appoint of presence in India will not want to go out of the market. So, the current wholesale operation that Walmart has created it should continue to stay invested in that business. The biggest benefit of this policy has been that the doors to multi-brand retail have been opened for foreign investment. Within the next couple of years, the government policy has to become more liberal. It is the bet they are taking and they will be able to access the entire Indian market. The fact that they have been present in the country for 2-5 years and have experience of operating in the country would help them. It will also help them create the necessary supply chain, logistics partners and so on to be able to then have a lead once they can launch their retail stores. Q: This throws the doors wide open for everyone to have conversations with anyone they choose to, what are you hearing on the ground? Is there a lot of talking going on now that we have seen Bharti and Walmart go their separate ways? A: Bharti has a valuable operation, will continue to be. I don’t think there is any extreme urgency for people to jump into bed with Bharti, but if it continues to create meaningful value, I am sure that a transaction will occur in the next 2-3 years and particularly once the guidelines open up a little bit more.