Walmart will probably reach an offer to buy a majority stake in Indian e-commerce player Flipkart by the conclusion of June in what could function as the US retail giant’s biggest acquisition of an on the web business, two different people with direct knowledge of the problem said.
Reuters reported a week ago that Walmart completed its due diligence on Flipkart and had made a proposal to buy 51 percent or maybe more of the Indian company for between $10 billion to $12 billion (roughly Rs. 65,000 crores to Rs. 78,000 crores).
A deal with Flipkart would step up Walmart’s battle with Amazon.com for a more impressive share of India’s fledgling e-commerce market, which Morgan Stanley estimates will undoubtedly be worth $200 billion (roughly Rs. 13 lakh crores) in a decade. Local media have reported that Amazon is exploring a possible counter offer for Flipkart.
Both sources declined to be named because the talks are private.
Walmart will buy both new and existing Flipkart shares, with the newest shares expected to value the Bengaluru-based firm at the least $18 billion, the sources said. The cost for existing shares would value the firm at about $12 billion, among the people said.
Japan’s SoftBank Group, which owns roughly one-fifth of Flipkart via its Vision Fund, is unlikely to market any one of its shares due to the low cost being offered for the existing shares, this source said.
Reuters has previously reported that early investors such as Tiger Global, Accel and Naspers will probably sell their entire stakes in Flipkart to Walmart if a deal is reached.
A package is not even finalised, and talks between Walmart, Flipkart and its investors are ongoing, among the people said.
Flipkart also counts eBay, Tencent Holdings and Microsoft Corp among its investors.
Flipkart didn’t react to a request for comment, an agent for Walmart in India declined comment while SoftBank said it doesn’t discuss speculation.
Big Indian battle
For Walmart, the world’s largest retailer known for its superstores, a deal with Flipkart would start the vast Indian market.
Walmart has for a long time tried to enter India but has remained confined to a’cash-and-carry’wholesale business amid tough restrictions on foreign investment. It currently operates 21 such stores in India.
By comparison, Amazon closely trails Flipkart, which along using its fashion units controls nearly 40 percent of India’s online retail market, in accordance with estimates by researcher Forrester.
Flipkart’s investors are involved that any deal with Amazon would run into regulatory hurdles as a mixture would have more than 70 percent of India’s online retail market, among the sources said.
Walmart’s push into e-commerce comes as Amazon has embraced offline retail, having an affiliate of the Seattle-based company picking right up a $27.6 million stake in Indian retailer Shopper’s Stop.
In the United States, Amazon also bought high-end grocer Whole Foods Market for $13.7 billion last year.
Walmart’s investment will give Flipkart not only additional funds to fight Amazon, but in addition arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management.
Former Amazon employees Sachin Bansal and Binny Bansal founded Flipkart in 2007 in India’s tech hub of Bengaluru.
Like Amazon’s founder Jeff Bezos, they began by selling books, but have diversified rapidly, including by selling smartphones, such as those produced by China’s Xiaomi, through exclusive flash sales, and now contend with Amazon in nearly all product categories.