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Saritha Rai, Business Standard\n<\/i><\/p>\n
Saritha Rai, Business Standard
\n<\/i><\/p>\n
Bengaluru, 29 September 2016<\/i><\/p>\n
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Walmart\nStores is in advanced discussions to invest as much as $1 billion (Rs\n6,647 crore) into Flipkart Online Services, as the two companies battle\nAmazon in the e-commerce space, according to a person familiar with the\nmatter.
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\nWalmart, the world’s largest retailer, would take a\nminority stake in Flipkart under the proposed agreement, the person\nsaid, asking not to be identified because the matter is private. Final\nterms of the deal have not been worked out and negotiations are still\nunderway, the person said.
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\nFlipkart’s most recent valuation was\nabout $16 billion (Rs 1.06 lakh crore), according to research firm CB\nInsights. It is the largest online retailer in India, but its lead has\nbeen under assault as Amazon steps up investments in the country. Chief\nExecutive Officer Jeff Bezos said in June he plans to spend another $3\nbillion (Rs 19,936 crore) in India to gain customers in the\nfast-growing market.
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\nA deal with Walmart would give Flipkart\nadditional capital to fight back and more expertise in battling the\ne-commerce pioneer. “If the deal goes through, the competitive\nintensity between Flipkart and Amazon will shoot up,” said Gautam\nChhaochharia, the Mumbai-based head of India research at UBS AG.
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\nThe\ndeal has potential benefits for Walmart too. Beyond any eventual\nfinancial return on its investment, Walmart would gain exposure to\nIndia’s expanding e-commerce market and have the opportunity to\nchallenge Amazon on more equal footing than the US.
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\nA\nspokeswoman for Walmart said she could not immediately provide comment.\nA Flipkart spokesman said, “It is our policy not to comment on rumours\nor speculations.”
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\nIndia is the next big potential retail prize\nafter the US and China, where foreign players have made little progress\nagainst Alibaba Group Holding.
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\nIndia’s online market will expand\nat an average of 45 per cent annually in the next four years and reach\n$28 billion (Rs 1.86 lakh crore) by 2020, according to estimates from\nKotak Institutional Equities.
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\nWalmart had earlier established a\nretail joint venture in India with Bharti Group, which runs the\ncountry’s largest telecommunications operator Bharti Airtel. But the\nbusiness failed to take off and Wal-Mart eventually sold its stake to\nits partner. If a Flipkart deal materialises, Walmart would be able to\nsupport its new ally with money and its decades of retail experience.
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\n“With\nits main competitor Amazon getting aggressive, Flipkart needs a solid\npartner to bolster its operations with not just capital but also\nbranding, logistics, sourcing and other retail experience, they won’t\nbe able to pull it off with small partners,” said Devangshu Dutta,\nchief executive officer of the Gurgaon-based retail consultancy Third\nEyesight.<\/span>
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\nAmazon has been gaining with major investments\nin infrastructure and partnership. The company has committed a total of\n$5 billion (33,227 crore) to the India market, including the latest\npledge from Bezos. “They know how to work against competitor Walmart,\nthey will know what to expect,” Chhaochharia said.
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\nWalmart has\nbeen renewing its efforts to battle Amazon online. In August, it agreed\nto buy Jet.com for about $3.3 billion and put founder Marc Lore in\ncharge of the combined company’s online operations.
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\nA tie up\nwith Flipkart may prompt moves from other competitors in India. Alibaba\nhas been funding Snapdeal.com, the third-largest competitor in Indian\ne-commerce, and has long considered the country a prime expansion\nopportunity as it seeks to generate half its revenue from outside\nChina. But with Amazon and Walmart both stepping up investments,\nAlibaba may have to consider doing the same, either with Snapdeal or on\nits own.
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\nIn Alibaba’s most recent post-earnings conference call,\nVice Chairman Joseph Tsai told analysts that India was a prized market\nwhere his company has investment in Snapdeal as well as an online\npayments service and mobile browser. “We’re very well strategically\npositioned in these emerging markets, and that’s the start of our\ninternational activity,” he said at the time.<\/p>\n