Sellers on Flipkart jittery about deal

Marcus Newton
May 5, 2018

"The buyback will enable the e-commerce giant to bargain for a favourable deal with the US-based retail behemoth Walmart, which is eyeing a majority or controlling equity stake in it to foray into the multi-billion dollar Indian retail space", a market analyst told IANS.

"Some of the finer details of the deal are still being worked out, but it would be announced next week", the person added.

The report states that Japan's SoftBank will also sell its stake in Flipkart, which is 20-plus percent.

Sources said that once the acquisition is completed, Walmart will most likely pump in an additional $2 billion to expand the business, set up more fulfilment centres and rope in more sellers. Earlier this week, WalMart-owned supermarket Asda joined forces with competitor Sainsbury's in a deal worth £7.3 billion ($10 billion U.S).

This pegs the valuation of Flipkart on the secondary market at around $20 billion, higher than what was initially estimated. Amazon is Flipkart's biggest rival in India. The biggest single investor SoftBank (on way to exit) may have apprehensions on the deal that encouraged the offer from Amazon. The agreement would give Flipkart, a company founded by former Amazon employees, a value of around $20 billion.

Alongside Walmart, there's some indication that technology giant Alphabet (parent of Google) will also invest in Flipkart.

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"However, since Walmart does not have a B2C online commerce presence in India, it will face far fewer regulatory hurdles".

Flipkart and its fashion units Myntra and Jabong control nearly 40 percent of India's online retail market. However, in China, foreign companies have been competing toughly against Alibaba.

The spokespersons for Flipkart as well as SoftBank could not be reached for comments despite repeated attempts.

A majority stake in Flipkart would put Walmart in a leading position in India - a rapidly growing market which is now viewed as "the next big potential prize after the USA and China, where foreign retailers have made little progress against Alibaba Group Holding Ltd", the report noted. Apart from SoftBank, some of the other major investors of Flipkart - Tiger Global Management, Accel and Naspers - are likely to sell their shares to the Arkansas-based retailer.

Sources say Kalyan Krishnamurthy, a Tiger Global veteran, who prepped the company for sale in his second stint as chief executive officer (CEO), will continue to drive operations at Flipkart for a fixed period of time.

IDG Ventures has exited the holdings of two of its funds including its domestic fund (Pandara Trust Scheme), but remains a shareholder via one of its overseas fund entities.

Other reports by MaliBehiribAe

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