by Lance Turner
Posted 10/19/2012 03:10 pm
Updated 2 years ago
The New York Times reports today that regulators in India are investigating Wal-Mart Stores Inc.'s $100 million investment in Bharti Retail, which operates more than 200 supermarkets in India.
The "informal inquiry" will determine whether the world's largest retailer has violated the country's rules limiting foreign investment in India's retail industry:
The regulators are investigating an investment of nearly $100 million by Wal-Mart in an Indian company, Bharti Retail, which operates more than 200 supermarkets across India, at a time when India restricted foreign investments in retailing. The investment took the form of debt securities that paid no interest to Wal-Mart but could be converted into a 49 percent ownership stake in Bharti.
India long prohibited foreign equity investments in retail chains that sell more than one brand of products, known here as multibrand retail. It recently changed those rules to allow foreign companies to own up to 51 percent of such stores, but that change has faced stiff resistance from opposition political parties and even allies of the governing coalition.
Wal-Mart and Bharti both say they are in compliance with local laws. But this is another instance where the retail's actions overseas have drawn scrunity. You'll remember Wal-Mart is already under investigation in the U.S. and in Mexico over allegations of bribery.