US-headquartered retail giant Walmart is looking to acquire more than 40% stake in Indian ecommerce giant Flipkart, as per two sources close to the matter.
The move, according to reports, is part of the retailer’s strategy to challenge Amazon’s global monopoly and would be one of its biggest overseas deals. Walmart is looking at buying new and existing shares in Flipkart and due diligence is likely to begin as early as next week, added the sources.
While the terms under discussion were not available, but Flipkart would be valued at more than the $12 Bn if Walmart decides to invest.
Over the last 18 months, the two companies have been exploring the different options that would allow the US retail giant to acquire a big stake in the Indian online marketplace. As per sources close to the development, the global retail giant is planning to spend somewhere between $5 Bn-$10 Bn to acquire a substantial stake in Flipkart. If the investment goes through, it would be one of the biggest cross-border deals ever made in India.
A deal with Walmart would give Flipkart much needed ammunition in its fight against Amazon. Similarly, for the US retailer, the deal would provide it another front in its efforts to take on Amazon.
Not only this, it would give the US retailer a bigger access to India’s ecommerce market that as per a report by Morgan Stanley, is expected to grow to $200 Bn by 2026. India’s retail trade is seeing increasing adoption of an omnichannel strategy, which lets companies sell their products online as well as through brick and mortar stores. Amazon, Walmart and Alibaba are the leading contenders in this category globally.
Walmart has for years tried to enter India but has remained confined to a ‘cash-and-carry’ wholesale business on account of tough restrictions on foreign investment. It currently operates 21 such stores in India.
Thus the investment in Flipkart is a part of a huge ecommerce push that has seen Walmart acquire a slew of startups. In September 2017, Walmart acquired Jet.com for $3 Bn. This followed a five-year-long period, in which Walmart took over 15 startups to onboard talent as well as integrate emerging technologies.
Earlier this month, the retail giant announced a partnership with Japanese online marketplace Rakuten to strengthen its presence in the Japanese market.
Amazon has remained true to its commitment to the Indian ecommerce market through frequent capital infusions. And thus for Flipkart to get ahead of its deep pocketed rival, a partnership with a similar deep-pocketed player like Walmart seems the next logical step.
[The development was reported by TOI]