Rajan Mittal quits as Bharti Retail’s Director

Rajan Mittal has quit as Director of Bharti Retail, after

the Enforcement Directorate launched a probe into a controversial 100 million dollars (over Rs 500 crores) investment by Walmart Stores in Cedar Support Services, the holding company of the retail venture. He has been replaced by Bharti Group’s general counsel and company secretary Mukesh Bhavnani.

While Bharti has clearly refuted speculations that he resigned to avoid the frequent summons expected from the ED in connection with the investigations that are expected to take months or even years to complete, industry insiders continue to believe in the same. Mittal served on the boards of both Bharti Retail as well as Bharti Walmart, the 50:50 cash-and-carry joint venture company. According to the company, he is not resigning from the Bharti Walmart board, which has also been issued notice by the ED in connection with the case signals that speculations are incorrect.

Mittal is the younger brother of telecom billionaire Sunil Mittal, the founder of the Bharti Group. Bharti Retail, which is owned by the Mittal family, currently operates more than 200 Easy Day branded stores nationwide. Both the brothers had started off as directors of Bharti Retail, when the company was founded in February 2007, but Sunil Mittal ceased to be a director in March 2008.

Meanwhile sales by Bharti Walmart, the wholesale cash-and-carry joint venture, to Bharti Retail, the entity that operates front-end stores, have come under the scanner after suggestions from the company that it may be in breach of the prescribed foreign investment rules. Bharti Walmart India CEO Raj Jain has told an enquiry committee headed by Justice Mukul Mudgal that the wholesaler, which is authorized to sell to kirana shops, restaurants and canteens, was deriving around 40 percent of its turnover through sales to Bharti Retail.

The FDI rules, while allowing wholesale trading of goods among companies of the same group, mandates that sales, taken together, should not exceed 25 percent of the total turnover of the wholesale venture. The Mudgal committee was set up after allegations that Walmart paid money and lobbied to get the Indian government to allow FDI in multi-brand retail. Scot Price, the head of Walmart’s Asia operations, denied the allegations when he was called to depose before the panel.