Walmart eyes Rs 2,117 billion Indian e-commerce pie with over 40% stake in Flipkart
BusinessToday.in February 16, 2018
The battle for India's fast-growing e-commerce pie - estimated to cross Rs 2,117 billion in this fiscal as per the latest Economic Survey - is poised to get fiercer in the days ahead. The world's largest retailer, Walmart Inc, is eyeing a stake of over 40 per cent in India's e-tailing poster child, Flipkart, and is reportedly willing to shell out as much as $10 billion for it.
In what would be one of its biggest overseas deals, the U.S. retailer is looking at buying new and existing shares in Flipkart, possibly a majority stake, and due diligence is likely to begin as early as next week, two people familiar with the matter told Reuters. A top Walmart official was in India recently and sources say that he also spent time at Flipkart's Bengaluru office during the visit. "For Walmart, India is an exciting and priority market. Our Global CEO Doug McMillon was in the country for India Business Review for its all three entities, India Cash & Carry business, Global Technology Centre and Global Sourcing," a Walmart India spokesperson said but declined to comment on "market speculations".
Though the terms under discussion were not immediately available, Flipkart would be valued at more than the $12 billion figure given when Japan's SoftBank Group Corp took roughly a fifth of the firm last year for $2.5 billion. Some media reports have even pegged the value at about $20 billion.
Both companies stand to gain much if this long-speculated deal goes through. While Walmart gets to grab a foothold in India's booming e-commerce industry, Flipkart stands to not only add financial muscle but also strengthen supply chain and enhance efficiency in procurement and product assortment. In addition, the deal would enable them to pool resources to compete against Amazon, in online as well as offline retail channels.
While Walmart has been forging new partnerships in the US-like the acquisition of Jet.com in 2016-to take on the Seattle-based Amazon, Flipkart has been engaged in a head-to-head competition against Amazon India locally. Flipkart has beefed up its war chest with funding of about $4 billion this fiscal. Apart from the funds raised from SoftBank, Tencent, Microsoft and eBay have pumped in about $1.4 billion. On the other hand, regulatory filings with the Registrar of Companies in November 2017 show that Amazon India has issued paid up capital of $2.7 billion towards Amazon Seller Services, its marketplace arm.
Then there is the relatively new entrant Paytm E-commerce Pvt Ltd, not to be taken lightly since it is backed by China's Alibaba Group Holding Ltd. The rat race is likely to get crazier here on. Market research provider Euromonitor expects about half of India's population to be online by 2021, with a majority hailing from rural areas and smaller towns, by which time the Internet retailing market size is likely to balloon to around Rs 4,000 billion. Who wouldn't want a slice of this pie?
With agency inputs