To take on Amazon in India, Walmart may double Flipkart valuation to $20 billion

Walmart Inc is offering to double the valuation of Flipkart to about $20 billion for a large stake in the Indian e-commerce leader.

The world’s biggest brickand-mortar retailer has sought a route to majority as it embarks on a renewed online push to take on Amazon in the US and across the world, people directly aware of the matter told TOI. The ongoing talks between Walmart and the Indian etailer entail multiple options, including one to buy out Flipkart’s numerous early shareholders, paving the way for a substantial interest, people in the know said.

Walmart, the world’s largest company by revenue, is gearing up for a renewed online push to take on Amazon in the US and across the world, a TOI report said. The ongoing talks between Walmart and the Indian e-tailer entail multiple options, including one to buy out Flipkart’s numerous early shareholders, paving the way for a substantial interest, it said.

Walmart could spend anywhere between $5-10 billion if the offer to buy a large stake finds favour with Flipkart, making it one of the largest cross-border deals in India, sources added.

SoftBank, which through its gargantuan-sized Vision Fund ploughed $2.5 billion into Flipkart last year, is not expected to pare down its shareholding. The financing round, which was a combination of primary and secondary share purchases, had pegged Flipkart’s blended valuation last year at around $10 billion.

Discussions between Flipkart—which is fighting a bruising, cash-guzzling battle with Jeff Bezos’s Amazon here in India—and Walmart have passed the preliminary stages, though the final contours and timelines of the deal-making was still being decided, another person in the know said. The Economic Times earlier this month reported about Walmart’s ongoing discussions with Flipkart to pick up a minority 15-20% stake in the Bengaluru-headquartered online retailer.

It is starting to become clear that financial investors alone cannot help Flipkart fight Amazon, which has billions of dollars to deploy in India. The stake sale to Walmart is a natural progression for India’s largest consumer internet firm, industry commentators said. Flipkart had explored an investment from China’s Alibaba in the past but those talks did not fructify into a deal. After going through a sluggish period and a series of valuation markdowns, from the highs of $15.2 billion in mid 2015, SoftBank’s entry had seemingly soothed nerves of several existing investors in Flipkart.

Most third party agencies do not disclose precise market shares, but they peg the Flipkart group, along with its fashion portals Myntra and Jabong, ahead of its American rival Amazon in terms of sales. Revenues for Flipkart group increased 29% to Rs 19,854 crore in the financial year ending March 2017, according to the regulatory filings made by the online retailer’s parent company in Singapore as growth across the industry slowed. Online retail, which grew at 133% during 2014, has hit the slow lane over the past two years and is expected to have grown at 26% in 2017, according to Forrester Research.

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