SUMMARY
Currently, Walmart is in talks with Accel and Tiger Global to buy their shares for around $1.5 Bn, valuing Flipkart at $30 Bn
Walmart has already spent $780 Mn in taxes to bring PhonePe’s domicile back to India from Singapore
The retail giant is also reportedly set to invest around $200-300 Mn in PhonePe’s ongoing $1 Bn funding round
US-based retail giant Walmart is set to invest as much as $2.5 Bn in India’s ecommerce and digital payments ecosystems via its holdings Flipkart and PhonePe.
Walmart owns majority stakes in both the decacorns, having picked up Flipkart in 2018 and PhonePe via Flipkart later on.
A majority of the said $2.5 Bn is set to come in the form of a proposed share sale, which would see venture capital (VC) firms Accel Partners and Tiger Global Management exit Flipkart. The two VC firms were early investors in the ecommerce startup valued at $33 Bn, and hold a total 5% stake in Flipkart collectively.
Currently, Walmart is in talks with Accel and Tiger Global to buy their shares for around $1.5 Bn, valuing Flipkart at $30 Bn. The transaction would raise Walmart’s stake in Flipkart to 72% if the transaction goes through.
Both Accel and Tiger Global have already made major dividends on their investment in Flipkart, but the latest share sale would see the two of them exit the startup ahead of an initial public offer (IPO).
Walmart has already spent $780 Mn in taxes to bring PhonePe’s domicile back to India from Singapore, ahead of the fintech decacorn’s IPO. The retail giant is set to invest around $200-300 Mn in PhonePe’s ongoing $1 Bn funding round, according to a source cited by TechCrunch.
The digital payments startup has already raised $350 Mn from General Atlantic at a pre-money valuation of $12 Bn as part of the mega fundraise.
Walmart’s bullishness on its India holdings comes amid an adverse macroeconomic funding environment. While the Indian startup ecosystem continues to face a funding winter, Walmart looks set to roll up its sleeves to support its holdings in India, and for good reason, too.
Both Flipkart and PhonePe dominate their respective markets in India. For instance, the payments decacorn processed nearly 40% of all digital payments via UPI in India in 2022, amounting to 3,114.42 Cr payments worth INR 55.71 Lakh Cr.
India: A Battlefield For Walmart & Amazon
Interestingly, while Walmart has seen success in India, its biggest rival Amazon has struggled to cope with the increased regulatory scrutiny and has been working to restructure its business in India, which has also resulted in hundreds of employees being asked to leave.
While Amazon has invested around $9 Bn in India, including investments for AWS cloud regions in the country, Walmart has invested $20 Bn. Amazon tried to capture the ecommerce market in India the same way it did in the US.
However, the retail giant picked up its biggest competitor, which now holds as much as 40% of the country’s ecommerce market. Flipkart flexed its muscles during the festive season sales last year, recording a 62% share of the $5.7 Bn gross merchandise value (GMV) recorded, per a RedSeer report.
On the other hand, Amazon continues to struggle with the Indian authorities, while facing stiff competition from Flipkart on the ecommerce front and Reliance and Tata on the retail front.
The difference in approach from Walmart branches off from the initial roadblocks it faced while entering India in the early 2010s. The foreign direct investment (FDI) norms were not clear and Walmart attracted bad press as it was perceived that the retail giant would cause the end of local kirana stores.
Since then, it has continued its presence in India by not directly entering the country but via its many holdings, including Flipkart and PhonePe but also Myntra and wholesale chain Best Price, which was rebranded to Flipkart Wholesale in 2022.
