Global retail giant Walmart reportedly has interest to pump in $2-3 billion as fresh equity into Sachin and Binny Bansal's online store Flipkart. In a bid to strengthen its hold on the e-commerce company, while buying existing shareholders for majority control, sources said the mega-sized organisation may look at roping in more investors over the next few years, while maintaining that the e-tailor's operations are in sync with its India strategy.
Sources said the Beast of Bentonville 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 local stores. “There are plans to make significant investments in India in various areas to set up a global scale business,” a source said. Walmart will most likely bring its managerial expertise, although the existing leadership in Flipkart is expected to stay as they “understand the market well”. It is said that the world's largest retailer by revenue has almost completed the process to buy a majority stake of up to 75 per cent in Flipkart. Sources said that Walmart might even partner with Google's parent Alphabet in the deal. The whole process, including getting various approvals, is expected to take more than two months.
N Chandramouli, CEO TRA Research, said, “The Walmart-Flipkart deal will be a disrupter in online retail industry in India. Walmart's partnership and investment in Chinese online store, JD.com is the model that they will probably be replicating in India as well. The Walmart-JD.com partnership in China has turned the applecart for Amazon in the country and this new partnership has the potential to do the same in India.”
Senior forecast analyst at research and advisory firm Forrester Research, said the investment was a deal Walmart had been looking forward to for more than 20 years to get access to the Indian retail market. He said that Walmart was not investing in the current performance of Flipkart but was looking at the future addressable market that India would provide in the next 15 years. “If I am Amazon and if I have to defend my second biggest market which is India then I have to buy Flipkart, it makes absolute sense. There is so much headroom for the online retail to grow in India that the valuation of Flipkart would appear small after some time,” said Hemchandra Javeri, co-founder, Forum Synergies India PE Fund Managers. Ajit Singh of Artiman Ventures said, “Here, the rising boats like Walmart and Amazon are lifting the tide in India.”
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 that employs 1,200 engineers. Sources said both Walmart and Flipkart will be run as separate entities and the former will use its experience in sourcing and working with farmers and kirana stores to strengthen its online presence.
Sachin Bansal to sell entire 5.5% to Walmart
Sachin Bansal, Flipkart's executive chairman and co-founder, will sell his entire 5.5% stake in the company to Walmart, as he departs from the internet firm, people close to the development said. Sachin is set to step down from the Flipkart board as Walmart prepares to invest in the homegrown web retailer, sources said. People close to the development said Sachin was “not aligned with the strategy and operating structure that was being proposed post Walmart coming on board.” When contacted, Sachin, did not comment on the reasons for him leaving Flipkart.
