While there is already talk in the air about Indian startups being egged on by their investors to turn profitable and to go for an IPO at the earliest, the biggest of them all, Flipkart may be eyeing an IPO too, according to the CEO of Walmart, Flipkart’s parent company.
Walmart acquired around 77% stake in Flipkart in 2018. Walmart paid $16 billion for this 77% stake.
Flipkart is still making losses, though the trend is showing improved financial performances over different quarters. The Flipkart group (comprising, Flipkart, Myntra, and PhonePe) recorded a revenue of Rs 43,615.50 crore for the 12 month-period ending March 2019, which is an increase of a little over 42% over the previous year. The losses at Rs 17,231.50 crore were higher in absolute terms but down by 63.2% over the previous year. This should give the parent Walmart some hope that things can be turned around.
The fact is that Flipkart plays a crucial part in Walmart’s overall international ambitions. Walmart International, the entity that encompasses Flipkart as well, recorded a revenue of $33 billion in the fourth quarter of FY20. Flipkart contributes a fair bit to this turnover.
Walmart officials have admitted as much in their interactions with the media recently that they have a lot of stake in the Indian operations and consider it a key market, going ahead. It is in this context that the officials have said Flipkart is being run as an independent entity and they see it as a fit candidate for an IPO.
The next question is if the IPO is to be floated in the Indian market, then the company has to be in profit for at least three years. Walmart can decide to directly list it in NYSE or other markets and float the IPO since such terms don’t apply there. Already a couple of Indian startups have taken that route.
