India To Surpass China As Walmart’s Biggest International Market This Year: CFO

Retail giant Walmart expects India to surpass China as its largest international market this year. 

“I believe India is going to be the largest market in the world this year, surpassing China. It’s a really promising opportunity in the future,” Walmart’s chief financial officer (CFO) John David Rainey was quoted as saying by The Economic Times while addressing the company’s annual institutional investors call.

Walmart operates Flipkart and PhonePe in India.

Rainey termed Indian ecommerce arm Flipkart and digital payments venture PhonePe as respective market leaders, adding that both these companies have a huge addressable market opportunity to tap into going forward.

The statement comes weeks after Walmart executives, during the company’s Q4 earnings call in February, said that Flipkart was bolstering the US-based parent’s gross merchandise volume (GMV) and revenue growth in the country. 

During the call last month, the top executives emphasised that Flipkart’s positive contribution margin was expanding and said that Walmart was in a much better position with regards to the ecommerce giant compared to some of the investments it had made ‘historically’.

While the retail major heaped praises on PhonePe, the company has been bogged down by the demerger of the digital payments arm from Flipkart. PhonePe was carved as a separate entity based in India in December last year. The deal saw existing shareholders of Flipkart Singapore and PhonePe Singapore purchasing shares directly in PhonePe India. 

However, the transaction created a tax liability of $1 Bn. Quickly afterwards, PhonePe also raised more than $450 Mn in funding from multiple investors this year so far and has seen existing investors shore up their shareholding in the company. 

China Growth Flattens, Focus On India 

India is still an emerging market for the retail major. While Walmart has operated in China since 1996, it first made its foray in India through a joint venture in 2006. It did not take full charge of the venture until 2012. 

Walmart has about 43 Sam’s Club stores and 322 Walmart Supercentres in China. In comparison, it has just 29 Flipkart mega stores in India, and aims to scale this number. Additionally, Walmart’s China operations have been pummelled by intense competition from local rivals and multiple lockdowns imposed in China across most of 2022.

On the other hand, Flipkart is the biggest ecommerce player in the country, while its physical stores also rake up a considerable amount of revenues for the US-based retail major. Flipkart competes directly with Amazon, while PhonePe is the biggest digital payments player in the country. 

PhonePe, on a standalone basis, consistently accounts for nearly half of the digital payments processed in India every month, both in terms of value and volume. Walmart in its February earnings call said that PhonePe processed an annualised total payments volume (TPV) of more than $950 Bn in Q4 CY22 and logged more than 4 Bn monthly transactions.

However, both companies continue to pile up heavy losses. While Flipkart’s marketplace arm posted a loss of INR 4,361 Cr in FY22, its business-to-business (B2B) arm saw its loss surge 40% year-on-year (YoY) to INR 3,404 Cr during the same period.

On similar lines, PhonePe also saw its loss widen 16.4% YoY to INR 2,013.7 Cr in FY22, while consolidated revenue stood at INR 1,692.7 Cr during the same period.

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