Apart from strengthening Flipkart's arsenal in its competition with rival Amazon, Walmart's investment deal with the homegrown giant may include setting up of a retail - offline - chain in India. This would enable the American retail giant to open retail outlets in the country which it currently cannot do directly because of certain FDI restrictions on overseas investment.
Walmart is negotiating for more than a 30 per cent stake in Flipkart, but it might have to settle for a 20 per cent stake, according to a report in The Economic Times. This is because of objections from investor SoftBank that has a 20.8 per cent stake in the Indian e-tailer.
"As large as they (Walmart) are, Amazon has eaten away a significant chunk of their revenues and I think...they view India as the largest market possibly for this (taking on Amazon)," a source said, as mentioned in agency reports. Last month Walmart also said it was partnering with Japan's Rakuten Inc (4755.T) in online grocery deliveries.
An investment banker told ET that Flipkart has been looking to open retail stores in India for a long time now but has been waiting for the right investment partner. As such, the partnership between Walmart and Flipkart already seems like a match made in heaven.
However, Walmart, SoftBank and Flipkart spokespeople declined to comment.
Reports mention that although the terms are not immediately available, Flipkart would be valued at a whopping USD 20-23 billion after the deal.
Flipkart, along with its fashion portals Jabong and Myntra control nearly 40 per cent of the Indian online space, which also places it ahead of Amazon. It is also looking to expand into grocery delivery with its Supermart. While Flipkart is sharpening its knives, Amazon is doing its bid to spread out to the Indian offline sphere too.
The company has rolled out its own food retailing in Pune, becoming the first foreign e-tailer to sell food items directly to customers. This roll out comes after Amazon was granted permission by the Indian government last year to invest USD 500 million in a wholly-owned venture to sell local produces and packaged food items through online and offline mediums.
(With agency inputs)
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