Morgan Stanley has said Walmart may exit Flipkart over strict FDI rules
CEO K Krishnamurthy said that Flipkart is unfazed with short-term hurdles
Flipkart wants to bring offline players as sellers to drive sales
Amid looming fear among Flipsters (Flipkart employees), CEO Kalyan Krishnamurthy reiterated the US ecommerce marketplace’s commitment to lead the ecommerce sector. He made the announcement in in a letter addressed to the staff following a Morgan Stanley report that said that Walmart could exit Flipkart due to the Indian government’s tough stance on FDI and ecommerce.
Flipkart is now reportedly holding talks with offline retailers as well as distributors of Samsung, Xiaomi and FMCG products which have revenue of INR 1-2K Cr with little or no online presence, as the company aims to enrol them as sellers on its platform to drive its sales.
“Walmart remains extremely confident in the potential of the Indian market and in Flipkart’s ability to lead the e-commerce space. By partnering with Flipkart, Walmart has taken a long-term view of the opportunities and hence is unfazed with any short-term hurdles,” ET reported, citing Krishnamurthy’s letter to Flipkart employees.
In a February 4 report, the Wall Street brokerage firm said that “an exit is likely, not completely out of the question, with the Indian ecommerce market becoming more complicated.” The firm was commenting after the government came down strictly against ecommerce players with foreign direct investment from influencing prices and controlling inventories on their platforms.
Though Flipkart, along with its rival Amazon, had sought an extension to the February 1 deadline to comply with the changes advised in the Press Note 2 of 2018 series on FDI policy in ecommerce, the Department for Promotion of Industry and Internal Trade (DPIIT) rejected their requests.
It is estimated that with the new rules, Amazon and Walmart have together lost $50 Bn in market capitalisation this week. While Amazon’s shares fell by 5.38% to $1,626.23, losing $45.22 Bn, Walmart’s share price fell by 2.06% to $93.86 on the New York Stock Exchange, losing $5.7 Bn in market capitalisation.
The rules have prompted Amazon India to restructure its ownership on Cloudtail, Amazon’s largest seller, after taking down thousands of products.
Inc42 yesterday covered Flipkart-owned fashion ecommerce company, Myntra, which has clarified that it does not own any equity stake in sellers on its platform, and maintains that it is in compliance with the FDI rules for ecommerce. The company is reportedly bringing several new sellers on board to drive is sales. The company is said to have more than 14 private label brands.
An email sent to Flipkart did not elicit any response till the time of publishing this report.
