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Is Walmart Looking To Make Flipkart A Public Company In The US?

Is Walmart Looking To Make Flipkart A Public Company In The US?

Walmart has said that it will be ramping up its investment in Flipkart

The US retail giant has taken a hit to its gross profit rate because of Flipkart’s inclusion in Q1 FY19

Walmart recently settled with the SEC to pay $282 Mn over charges of graft in their overseas business

Indian ecommerce major Flipkart will reportedly file for an initial public offering in the United States over the next two years. The company CEO Kalyan Krishnamurthy is said to have informally discussed the IPO timeline with Flipkart’s top executives.

According to an ET report, Krishnamurthy had told the executives that there is a need for Flipkart to tighten its compliance and achieve profitability by 2022 as it is preparing to go public soon.

With this development, Flipkart’s parent company Walmart might be looking to partially or fully exit the Indian company, the report added. Global retail giant Walmart had acquired Flipkart in 2018 to acquire 77% stake in the Indian company. Later in November 2018, the American company had raised its stake to 81.3%.

Walmart is said to be facing trouble in Indian market with the country’s stringent FDI ecommerce guidelines and the largely discount driven industry which has made it challenging for Walmart to turn Flipkart profitable.

Commenting on the report, a Flipkart spokesperson told Inc42, “We don’t comment on board discussions. However, as we have said before on this issue , an IPO has always been part of Flipkart’s ambitions & long-term strategy, but right now we don’t have a timeframe on that.”

The Walmart-Flipkart Saga

In the first quarter of FY19, Walmart’s international sales fell 4.9% and the gross profit rate declined 172 basis points primarily due to Flipkart’s inclusion in this year’s results, according to a company statement at the time.

However, the Walmart CEO Doug McMillon had said, “I continue to be excited about the opportunity with Flipkart and PhonePe. I’m impressed with the team and their ability to innovate for customers with speed.” Following this, Walmart had later announced to invest $1.2 Bn of its cash reserves to fund the operations of the Indian ecommerce marketplace.

Earlier this week, Walmart is now settling with a US regulatory body over charges of violating anti-corruption regulations while conducting its business in India, China, Brazil and Mexico. The company will be paying $282 Mn as part of the settlement deal.

The US Security and Exchange Commission (SEC) has charged the company for violating the Foreign Corrupt Practices Act (FCPA). According to the SEC, Walmart failed to sufficiently investigate or mitigate certain anti-corruption risks and allowed subsidiaries in Brazil, China, India, and Mexico to employ third-party intermediaries who made payments to foreign government officials without reasonable assurances that they complied with the FCPA.

Earlier in April, Walmart had reportedly started a country-wide investigation into Flipkart over charges of corruption in setting up of Flipkart fulfilment centres. According to a report, Walmart realised that Flipkart warehouses do not have the necessary permits, and in some cases, government officials have been paid off to get them. However, a Flipkart spokesperson denied the report at that time.