Walmart Inc. will acquire a huge stake in online business by a probability to make a deal to buy a majority stake in Flipkart an Indian e-commerce player by the end of June 2020, as stated by two people who are in the direct knowledge of the deal, which will be Walmart’s biggest stake in an online business till date.
The reports sat that Walmart has made a proposal to buy 51 per cent or more of Flipkart for an amount between $10 billion and $12 billion after Walmart completed its due diligence on Flipkart. If the deal would be confirmed, Walmart would be at an advantage with respect to its battle with Amazon.com for a bigger share of India`s fledgling e-commerce market. The local media have reported that Amazon is trying to explore and find a way to offer a better deal to Flipkart. The sources shall not be disclosed as per their demand as these talks are private.
Walmart is planning to buy both new and existing shares of Flipkart, a Bengaluru based company. The new shares valuation expected to be at least $18 billion as stated by the resources and the valuation of existing shares will be around $12 billion. Though Japan’s Softbank group who owns one-fifth of Flipkart by its vision fund would not be selling any of its shares because of the price being offered is low for the existing shares as stated by the sources.
Walmart the world`s largest retailer with its superstores over many countries and Flipkart, the Indian ecommerce giant, signing a deal would open up the vast Indian market for Walmart. Walmart has been trying to enter in the Indian market since a very long time but there have been restrictions on foreign investments but has remained confined to a `cash-and-carry` wholesale business which operates 21 such stores in India.
In comparison with Walmart, Amazon closely trails Flipkart, which controls India’s, online retail market by nearly 40 per cent with its fashion units according to estimates by researcher Forrester. It’s a matter of concern for the Flipkart’s investors that any deal with Amazon will help it have more than 70 percent of India`s online retail market as stated by the sources.
Amazon has embraced the offline retail market hence Walmart tries to push into ecommerce. Amazon’s offline retail an affiliate of the Seattle-based company having a $27.6 million stake in Indian retailer for fashion as Shopper`s Stop Ltd.
Amazon made a deal with the high end Whole Foods Market Inc. by buying it for $13.7 billion last year.
Flipkart would be at a greater advantage with its deal with Walmart to fight Amazon as it will have more funds. Also, Walmart will arm Flipkart with supply chain management, extensive experience in retailing, logistics and many other benefits.
Flipkart was founded by Binny Bansal and Sachin Bansal in 2007 who were employees of Amazon in India`s tech hub of Bengaluru. Just like amazon, they begin with selling books but started selling smartphones through exclusive flash sales. Now they have reached a stage to compete with Amazon in all the categories of goods.