SUMMARY
Walmart had valued Flipkart at about $21 Bn at the time of acquiring a 77% stake in the company
Walmart’s total revenues for the April quarter of FY20 increased by $1.2 Bn to $123.9 Bn
Rival Amazon has also recently invested INR 2,800 Cr into its Indian marketplace
About ten months into acquiring a majority stake in Flipkart, Walmart has decided to use $1.2 Bn of its cash reserves to fund the operations of the Indian ecommerce marketplace.
According to the statement, of the $2.7 Bn ending April 30, 2019, approximately $1.2 Bn can only be accessed through dividends or inter-company financing arrangements subject to approval by Flipkart minority shareholders.
The commitment to invest in Flipkart comes weeks after the visit of Walmart President and Chief Executive Officer Doug McMillon and Judith McKenna, president and CEO of Walmart International, to India in April-May. Both the top executives were said to have assessed the progress made by Flipkart and formalised a strategy to take on rival Amazon.
Walmart had valued Flipkart at about $21 Bn at the time of acquiring a 77% stake in the company. The valuation comprised primarily of $2.2 Bn in cash and cash equivalents, $2.8 Bn in other current assets, $5 Bn in intangible assets, and $13.5 Bn in the company’s goodwill.
Flipkart also had liabilities of $3.7 Bn, comprising primarily of $1.8 Bn of current liabilities and $1.8 Bn of deferred income taxes.
Compared to the same period in the previous fiscal year, Walmart’s total revenues for the April quarter of FY20 increased by $1.2 Bn to $123.9 Bn. The company said that the increase in revenues was due to an increase in net sales, which was primarily due to overall positive comparable sales for the Walmart US and Sam’s Club segments, the addition of Flipkart’s net sales, and positive comparable sales in the majority of it International markets.
Rival Amazon has also recently invested INR 2,800 Cr into its Indian marketplace. It had also invested INR 2,200 Cr into its Indian entity in December last year. The Jeff Bezos-led company has so far made over $5 Bn worth of investment in India.
These developments come at a time when India has rolled out new foreign investment rules — introduced in February this year. The new FDI rules prevent ecommerce companies like Flipkart and Amazon from selling products through companies where they have an equity interest. It also bars them from having agreements with sellers to sell products exclusively on their websites. The new policies were aimed at stopping deep discounts to help small traders and ecommerce platforms.
