The American retailer Walmart Inc. could end up taking a large stake in Flipkart Ltd at a price which could value the largest ecommerce firm in India between $20 billion and $23 billion. If all goes through; the deal could put Walmart against Amazon in India, thus mirroring a fight between the two companies in the US.
Walmart expressed interest in buying Flipkart but the buyout is unlikely to fall through as a key investor in Flipkart, SoftBank Group is opposed to the sale. SoftBank is not willing to cash out this early and consider themselves as long-term investors in Flipkart.
Currently, the talks are in the early stage as the companies have not finalized the final details. It is expected that Walmart will invest fresh capital in Flipkart and also buy shares from the existing investors including Naspers and Accel Partners. Any deal can make Walmart the largest shareholder in Flipkart. Google has also offered to invest in the e-commerce company at a valuation of $15-16 billion. Flipkart is also talking to other investors for the same. Walmart is striving to buy a stake of 15-20% in Flipkart.
Flipkart received a commitment of $1.4 billion in fresh capital from SoftBank Group in August 2017 which valued the online retailer at $14 billion. Flipkart has raised more than $6 billion since 2007. Its current valuation includes the fashion businesses Jabong and Myntra, eBay India and mobile payments firm PhonePe. Walmart has been eyeing the retail sector in India for years but the existing foreign direct investment policy will not allow the firm to have a meaningful presence in the country. It operates the retail and e-retail segment in the country but has stayed out of direct retail. Walmart has not joined hands with any retailer in India since its partnership with Bharti Enterprises ended in 2013.
New investors are willing to value the company at a higher price because Flipkart has shown that it is holding strong against Amazon, which has been unable to unseat the local rivals as the country’s largest online retailer despite spending significantly more. Flipkart is also seen as one of the most attractive assets in the Internet economy which has benefitted from the long-term potential ascribed to the internet market of India by investors.