Walmart could initially buy about 20-26% stake in Flipkart and increase its shareholding to 51% in tranches.

Walmart in final stages of acquiring majority stake in Flipkart ReportImage source: Benchapple via Flickr
Atom Ecommerce Wednesday, March 14, 2018 - 17:47

The battle for supremacy in the Indian ecommerce space is getting fiercer by the day and with billions of dollars at stake. While Amazon Inc has already committed over $5 billion, its US offline rival, Walmart is betting even bigger by moving towards holding majority shareholding in Flipkart.

Walmart is now said to be nearing closure of a deal with Flipkart by which the US retail giant will acquire, through secondary purchase of shares from existing shareholders apart from making investments through the primary route. Reports indicate that the larger plan is for Walmart to acquire 51% of Flipkart and it could end up spending around $10-12 billion when the process gets completed. Beginning with around 26%, the holding may be increased in a few tranches.

This comes after Walmart’s abortive attempts in the retail space, where it tied up with Bharti Enterprises of Airtel fame but it broke down.

In the process, the major investor in Flipkart, the SoftBank Group of Japan may see its holding being brought down substantially. Besides SoftBank, there are other key investors in Flipkart, like Naspers of South Africa and Tiger Global of the US.

Walmart is said to be in discussions with these investors also and if they decide to offload their stakes in favor of Walmart, it could turn out to be one of the most significant exits in the Indian startup scene and that too yielding phenomenal returns for the early stage investors. To give you perspective, Tiger Global had invested around $1 billion in 2009, when it was founded. Even after liquidating shares worth around $500-600 million almost a year ago, the 20% holding that is still Tiger Global’s possession, could fetch it as much as $4 billion!

One interesting aspect arising out of this development is the valuation of Flipkart. It could catapult to the $20-22 billion levels, up almost double from the $10.2 billion it was estimated to be, just a few months back.

The Indian retail market, overall, is being projected at a whopping $1.3 trillion by the year 2020 and the online portion of it could be anywhere between 5% and 10% and that is largely the pie these giants are all after. Walmart may, having been the last word in the brick & mortar model, open up physical stores in India as well, besides strengthening the online business of Flipkart.

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