Walmart plans $2-3 billion push for Flipkart
NEW DELHI: Global retail giant Walmart plans to pump $2-3 billion (over Rs 13,000 crore) as fresh equity into Flipkart to strengthen its hold on the e-commerce company, while buying existing shareholders for a majority control in a deal that is expected to be announced this week.
Sources told TOI that the Beast of Bentoville may look at roping in more investors over the next few years, while ensuring that the e-tailer’s operations are in sync with its India strategy. Over the next two years or so, a Flipkart IPO is also planned, although the exact listing time will be linked to market conditions.
In response to a questionnaire, Walmart said it did not wish to comment.
A larger equity base and fresh capital are seen to be critical for Flipkart to take on Amazon in India, where the Jeff Bezos-founded company was seen to be slowly stealing a march over its copycat rival, founded by Sachin and Binny Bansal over a decade ago.
While many see the deal to be a sell-out to foreign investors, Walmart is expected to highlight how it intends to work with local SMEs and the farm sector in the country, a strategy that it has followed for its wholesale cash-andcarry venture, after being denied an entry into the B2C retail market, where it had hoped to open a chain of stores.
Sources said Walmart has lined up “significant” investments in setting up cold chains, stepping up sourcing for global operations, building a supply chain, setting up modern warehouses and building partnerships with kirana stores. “There are plans to make significant investments in India in various areas to set up a global scale business,” a source said.
Walmart is likely to bring its managerial expertise, although the existing leadership in Flipkart is expected to stay as they “understand the market well”. Flipkart is set to sell more than 70% stake to Walmart and Google’s parent Alphabet in a deal, which will value the company at $20 billion.
Walmart is expected to get a 55-61% stake in Flipkart, Alphabet will pick up around 10%. “It could be between 73% and 75% stake,” another source said, without elaborating.
Walmart India owns and operates 21 stores under the cash-and-carry system in nine states across the country. It also has a global sourcing centre in Bengaluru and a technology centre, which employs 1,200 engineers. The sourcing centre procures non-food products from domestic companies for over a dozen global markets. Sources said the two businesses will be run as separate entities and Walmart will use its experience in sourcing and working with farmers and kirana stores to strengthen its online presence.
Analysts said they expect a large chunk of the fresh investment in strengthening back-end infrastructure. They said with acquisition of Flipkart, Walmart will be able to extend its expertise in managing physical goods in the digital space.