The Board of Directors of Walmart-owned Flipkart has decided to approach the equity market in the United States by launching an IPO. It is reported that even the timeline for the IPO has been decided and conveyed to the top management within Flipkart. The Board’s meeting was held recently in the US, in in Bentonville, Arkansas along the side-lines of Walmart’s board meeting.
Flipkart’s senior management, that includes the vice presidents, will now get down to toning up the company’s operations. The financials when resented to the investors in the US must appear impressive.
Walmart holds 77% stake in Flipkart, which it acquired last year after paying $16 billion. The inclusion of the Indian entity’s results in its own balance sheet would have only brought down the overall picture. Now, with this IPO, it remains to be seen what portion of this 77% Walmart offloads. There are people who believe it could be as high as the whole of the 77%, but that is more in the nature of speculation. There’s no mistaking that profitability will figure high on the US giant’s agenda and the Flipkart CEO Kalyan Krishnamoorthy and his core team would have been handed out a mandate to improve the profitability of the Indian ecommerce platform on an urgent basis.
However, responding to these reports, Flipkart said that the IPO is part of its long-term strategy, while its focus right now is on driving growth for its e-commerce business.
"An IPO has always been part of Flipkart's ambitions and long-term strategy but right now, we don't have a time frame on that. Flipkart is currently focused on driving the growth of e-commerce in India to get 200-300 million new customers into e-commerce fold," PTI quotes a Flipkart spokesperson as saying in an e-mailed statement.
But if there are IPO plans in the words, some emphasis will be placed on the various compliance issues as well. An IPO will require that the company stays clear of any controversies and uncertainties in terms of the regulations in force in India. The adherence to the FDI regulations would have dented some of its functioning since the model adopted by Flipkart for over a decade in disrupting the retail trade in the country through deep discounting has come to be challenged. A recent settlement of bribery charges by paying a penalty of $282 million to the SEC in the US has further alerted Walmart to the compliance issues in the different countries it operates. Markets like China, India and Brazil come with their share of complaints of such unfair practices at the level of traders who operate on the online platform as vendors.