An Indian lawmaker has made a complaint to the government claiming that Walmart illegally invested in a local supermarket chain in violation of rules restricting direct foreign investment in the retail industry. Regulators have begun an informal inquiry into the matter, according to an article in Friday's New York Times.
The claim is that Wal-Mart invested nearly $100 million in debt securities in a holding company, Cedar Support Services, which owns Bharti Retail, which in turn, manages the Easyday supermarket chain's 220 stores across the country. Upon conversion, the securities, compulsory convertible debentures, would give Walmart a 49 percent stake in the chain.
India recently changed its longstanding rules banning foreign equity investments in retail chains selling more than one brand of product, and now allows foreign companies to own up to 51 percent of such stores.
However, the complaint, made in a letter to Prime Minister Manmohan Singh in September by a lawmaker representing the Communist Party of India, alleges that Walmart made its investment before the new law went into effect, according to the online publication just-food.
The Financial Times reported that the Bharti stores have been managed by Walmart since 2010, though they are "ostensibly owned by its Indian partner," Bharti Enterprises.
Walmart denies any wrongdoing. "We are in complete compliance with India's FDI laws. All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India," a spokesperson said.
The Communist Party of India is opposed to foreign investments.
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