India's Flipkart Yet to Seal Stake Deal With Walmart to Thwart Amazon

Bloomberg reported earlier on Friday, citing unnamed sources, that Flipkart's board had approved a deal to sell a stake of about 75 percent in the company to a group led by US retail giant Walmart for about $15 billion.

"Some of the finer details of the deal are still being worked out, but it would be announced next week", the person added. The same report further includes that SoftBank is selling its entire 25% stake (about $5 billion in value) in Flipkart and will no more take part in future.

Sources said that once the acquisition is completed, Walmart will most likely pump in an additional $2 billion to expand the business, set up more fulfilment centres and rope in more sellers.

The buzz is that Walmart will acquire more than 70 per cent in Flipkart through a mix of cash and stock and that SoftBank, which holds around 24 per cent in the e-tailer, will exit completely.

However, investors and the company founders were said to be more in favour of Walmart because they were apprehensive that the deal with Amazon could face more scrutiny from regulators. It is not clear at this stage if the Japanese conglomerate is on board with the $20-billion valuation proposed by Walmart.

The approval comes days after rival Amazon put in a bid to pick up close to 60 per cent in Flipkart at a valuation of around $20 billion.

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Both Amazon and Flipkart are pouring billions of dollars to win shoppers in the fast-growing market that is expected to be worth $200 billion a year within a decade.

The spokespersons for Flipkart as well as SoftBank could not be reached for comments despite repeated attempts. Alphabet Inc, the parent of Google, is also set to participate with Walmart. This is because the companies together control around 85 per cent of India's online retail market.

The investment pie: Investment numbers are market estimates; stake sale is industry estimates Note: Figures based on data available before $350 million buyback in Singapore.

"Walmart has been losing ground to Amazon in their traditional United States market, while Flipkart in India has managed to maintain its lead, albeit slender, over Amazon". Other investors including Tiger Global, Accel, Microsoft, Naspers and eBay will remain on the capitalisation table of Flipkart. It is understood that Kalyan Krishnamurthy, CEO of Flipkart, is likely to stay on after the acquisition.

IDG Ventures has exited the holdings of two of its funds including its domestic fund (Pandara Trust Scheme), but remains a shareholder via one of its overseas fund entities.

  • Darren Santiago