Even as the government has reaffirmed its election promise of not allowing foreign direct investment in the multi-brand retail, Walmart India has decided to strengthen its cash-and-carry business in the country and ensure better compliance with local rules. Walmart India president and CEO, Krish Iyer, in a recent conversation with Sandeep Singh and Anil Sasi, said the company, in the wake of the bribery allegations, has invested significantly on beefing up compliance, both in terms of people and processes.
The general impression is that cash-and-carry (wholesale business) is just a step towards ultimately getting into retail. While the new government has red flagged FDI in multi brand retail, does that deter you?
One set of players use cash-and-carry as a back end, supplying to the front end, the other use it as a profitable model. For us it is a profitable business model. In the past, we used it for supplying to front end but we discovered that it is a great model for India. It is a discovery for us and having discovered, we don’t want to give it up. We want to commit to the country and to the model. These 20 stores are making profit at the store level.
What is your view on the government’s stand ?
I believe that every government takes decisions that are in the best interest of the people and the country. To judge and comment on that is not right and as a good corporate citizen and an individual, I respect that.
More so now, when we have a clear business opportunity that is earmarked and I see no reason to chase another opportunity and keep worrying about it. I tell my team to focus on this one (cash- and-carry), we have made it good and big, let’s make it much bigger. Investment is not a constraint, the whole business will be equity funded and Walmart is willing to put whatever is necessary to grow this business so we are focussing on that. So, whatever may happen in the regulations in retail, it doesn’t worry me at this point in time. We will continue to engage with the government telling them what we are doing in the country.
There has been some lag in opening them and they have not come up.
We are currently in the process of building a pipeline. A new store opening process is a long one and takes around 23 months. The first store takes time but it will come up next year and once that happens and the momentum starts, it can be very rapid as the pipeline is ready. That’s what we are currently working on. There are many proposals in the pipeline right now and availability is not an issue. We are looking at 50 stores in addition by 2020.
There have been reports on Walmart looking to acquire the stores of Carrefour. Are you looking at inorganic expansion too?
We would not like to comment on market speculation. The current 50 stores is strategic greenfield expansion, any kind of acquisition in a country like India in the cash-and-carry segment would be more opportunistic, it won’t be strategic because there isn’t enough supply available. I think if some opportunity comes some time we will be open to it. But it’s always better to plan greenfield.
Post the bribery allegations, statements from the company said that compliance levels would be beefed up to ensure that such things don’t happen again. What is the status on that?
In terms of compliance we have invested significantly both in terms of people and processes. It has been both global and local investment and at this point in time we are confident that we will be able to open the new stores in a compliant manner.