French retail giant Carrefour close operations in India as it seeks to pull out of underperforming markets to focus on reviving sales in the home market.
The world's second largest retailer by sales has been operating in India since 2010. It will shut five Indian wholesale stores by the end of September, according to a company statement.
Carrefour has been in talks with Indian retail companies and strategic investors about its Indian assets in recent months. It has invested about £29.27M in its India operations, retail consultants say.
Professor Sourindra Banerjee of Warwick Business School, believes the retailer could not cope with the major obstacles facing foreign retailers in India.
Banerjee said: "Although the new Indian Government does not support foreign retailers coming into the country I think Carrefour’s decision to exit the market is because of the problems the French retailer is experiencing.
"Carrefour is pulling out of other emerging markets as well, as its revenues have dropped from €85Bn (£67.41Bn) in 2009 to €76Bn in 2013. Their sales are falling, they are selling off their assets, with their assets falling from €50Bn in 2009 to €42Bn in 2013. In addition, their price to earnings ratio has come down from 84 in 2009 to 16 in 2013. So Carrefour is getting out of geographies that are not viable, like the difficult Indian market. Carrefour pulling out of India has not been triggered by the new Indian Government stand of not supporting foreign retailers into the country."
However, Banerjee admitted the Indian market poses a particular challenge to foreign retailers on several fronts.
He said: "Having said that India is not an easy market to operate in for any foreign retailer. The Indian market is difficult because of primarily three reasons: First, India does not have well developed physical infrastructure in terms of roads, railways, storage facilities and a reliable supply of electricity.
"Second, the price for real estate in prime locations is exorbitant in the major cities, which will be the largest market for these retailers, so making the initial investment into the retail market very high.
"Third, retailers in India will find it difficult to get regular supplies for their stores because Indian agriculture is monsoon dependent, lacks mechanisation and agricultural produce in India is not covered by insurance."