Walmart, the world’s biggest retailer, looks one step closer to spending a gigantic $10 -12 billion on a 51% majority stake in Indian e-commerce leader Flipkart to step up its international e-commerce expansion.
A takeover of Flipkart would also give Walmart control of Ekart, Flipkart’s in-house delivery operation, and thus its own e-commerce logistics operation in India.
The US retailer, which is trying to grow its online sales to catch up on Amazon, has been in talks with Flipkart shareholders for the past few months over a possible deal and last week completed due diligence, according to numerous Indian media reports. Reuters recently put the price of a 51% stake at $10-12 billion, valuing the Indian company at $20 billion or more.
The Economic Times reported today that four key investors, Tiger Global Management, media group Naspers, venture capital firm Accel and Chinese internet services group Tencent, have now agreed to sell their holdings to Walmart. Moreover, Flipkart founders Sachin Bansal and Binny Bansal may also dispose of part of their holding. Collectively, these six shareholders own more than 55% of company shares.
However, Flipkart’s biggest investor, Softbank, which has a 20% holding, is reportedly still holding out in the hope of securing an even better price. The Japanese financial group invested $2.5 billion in the Indian e-commerce leader last year.
A problem for the deal could come from Flipkart’s exclusive four-year worldwide cooperation deal with eBay that was agreed as part of its takeover of eBay India last year. The US e-commerce group also gained a 5% stake in Flipkart in return for a $500 million investment.
Technology news website Recode reported that Walmart might first have to agree a deal with eBay covering Flipkart’s international sales and eBay’s India sales before it can go ahead with a Flipkart takeover.
Flipkart, which is just ahead of Amazon in the Indian e-commerce marketplace, still makes heavy losses. It reported a $1.4 billion loss on turnover of $3 billion for the year ending March 2017. Amazon, too, makes losses in India, according to media reports.
However, according to experts, international players are focusing on the long-term potential of the Indian e-commerce market which is predicted to grow dynamically over the coming decade, and are prepared to carry the heavy short-term losses in order to build up a strong market position.
