Walmart India's problems multiply as President quits

Nearly three weeks after the government decided to reiterate its tough pre-conditions on allowing FDI in multi-brand retail, a shake-up has begun in the sector. Raj Jain has quit as President of Walmart India, the local subsidiary of the US-based retail giant, after six years with the company. Jain joined Walmart in 2006 as President of Emerging Markets in Shanghai, China, before moving on to India a year later.

Jain's exit is not a good sign for Walmart India which has been trying hard to enter the multi-brand retail segment for years now. In September 2012, the government finally agreed to allow FDI in multi-brand retail. But it imposed several riders on its entry. These riders include local sourcing norms and fresh investment in back-end infrastructure, which are difficult to comply with. Recently, after the Department of Industrial Policy and Promotion's clarifications, ratings agency CRISIL said foreign multi-brand retailers were unlikely to make significant investments in India over the next two to three years.

Jain was also under pressure as Walmart's cash and carry joint venture with Bharti Enterprises has not been doing well. In financial year ending December 2011, the retail chain, which has 20 outlets across the country, had accumulated losses of Rs 765 crore on account of investment in logistics, supply chain and new store openings. In fact, many retailers were planning to use their existing cash and carry businesses as back-end infrastructure feeding into their front-end operations as and when they are allowed to set up shops. However, the recent clarifications reveal that only fresh investment in back-end infrastructure will be allowed. Details of Jain's next assignment are not known yet. Attempts to contact him failed.

Over the past year, Walmart has been limping from one crisis to another. In November, its India JV suspended several employees as part of an internal corruption investigation. The probe has put brakes on the JV's aggressive expansion plans for the Indian market. The incident was followed by another inquiry initiated by the government over alleged bribing of Indian officials to get market access.