Walmart plans to invest in India-based Flipkart

The primary investment by Walmart will increase the valuation of Flipkart to about $20-22 billion

World’s largest retailer Walmart is in talks to make a substantial investment in Indian e-commerce giant Flipkart, reported Bloomberg.

Walmart is expected to invest about $7 billion in Flipkart to become the largest stakeholder in India’s most successful startup. People familiar with the matter told Bloomberg that the company intends to acquire about one-third stake in Flipkart to enter one of the fastest growing online retail markets.

According to the report, Walmart is expected to buy the shares in part from New York-based Tiger Global Management and Japanese conglomerate SoftBank Group Corp. The deal, if finalized, would lead Walmart to a neck-to-neck fight with another American company Amazon which is already in a race to conquer the most promising online market in the world.

The primary investment by Walmart will increase the valuation of Flipkart to about $20-22 billion, a rise of about 100 percent from the $10.2-billion valuation it got in April 2017 before the Chinese internet giant Tencent made an investment in the e-commerce company.

Though the Bentonville-based company wanted to acquire majority shares in Flipkart, other investors like SoftBank Group were not in favor of the decision. But, after repeated rounds of discussions, SoftBank has agreed to let Walmart become the largest shareholder in Flipkart. But, they won’t have controlling stake as they had planned earlier.

A report by Business Standard claimed that Flipkart would issue 20 percent new shares to Walmart as the primary component and the secondary component of investment equivalent to the 20 percent would be used to give exits to some of Flipkart’s earliest investors such as Accel Partners, Tiger Global, Naspers and IDG Ventures. So, Walmart’s entry would also see some biggest exists in Indian startup environment.

But, the deal is yet to be finalized since SoftBank wants to retain a considerable stake in Flipkart, while Tiger Global intends to hold at least a small stake even after selling some portion to Walmart. Sources close to the developments say that the final deal may be reached within a few weeks.

“It is going to be great for Accel Partners and Tiger Global. This is what they have been waiting. From Walmart’s perspective, Flipkart is the ideal candidate because it sits between Amazon and Alibaba,” Manish Maheshwari, former head of Flipkart’s marketplace business, was quoted as saying by Business Standard.

However, Walmart’s investment would strengthen the Bengaluru-based e-commerce company to counter its American rival Amazon.

Amazon has been aggressively penetrating into the Indian market with enhanced logistics facilities and hefty discounts. Amazon founder Jeff Bezos has expressed his intention to gain substantial market share in India.

Walmart that had lobbied in the US regarding its entry into India is now seeing a steady growth of business in the country. It has 20 cash-and-carry (CC) stores in India and is expected to launch 50 stores by 2021 with an overall investment of over $500 million.

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