Walmart's big gamble on India

Walmart's big gamble on India

Analysts generally agree that, in the long term, Walmart's WMT, +0.18% $16 billion, 77% stake in Flipkart will help the retail giant gain ground in the growing and increasingly significant market.

The remainder of the business will be held by some of Flipkart's existing shareholders including China's Tencent Holdings Ltd., Tiger Global Management LLC, Microsoft Corp. and Flipkart's co-founder and group chief executive officer Binny Bansal.

"One area we could see more deal activity is within e-commerce as Modi's government views this sector as favorable and defines it as a marketplace, a platform where local players can buy and sell goods", says Kumar. The transaction, which was officially announced on Wednesday after months of extensive media coverage, has been in the works since 2016.

"I didn't really take it that way", he said.

Although many sellers that TechCircle spoke to are excited about the global market opportunities and sourcing afforded by the Walmart deal, some are equally wary of the USA retailer's global strategy to rebrand and sell white-label products, and to aggressively supply its own private labels.

Buying a controlling share of Flipkart places Walmart ahead of Amazon in India's relatively young internet retail world. Its share at the end of 2017 was 5.6%.

More news: Reds-Harvey's New Home
More news: Palestinians injured by Israeli forces at Gaza border
More news: Poll your friends with the new Instagram emoji slider!

Addressing fears of sellers and trader associations over the impact of the $16-billion Walmart-Flipkart deal, Kalyan Krishnamurthy, CEO of Flipkart wrote to sellers assuring them that there will be no changes in the operating processes post the deal. It is now going to be interesting, how Amazon will tackle the combined capabilities of Walmart and Flipkart.

US-based eBay today said it plans to sell its stake in Flipkart for about USA $1.1 billion, and will relaunch eBay India focusing initially on cross border trade opportunity.

According to an ET report, the discussions are very fluid and since SoftBank's Vision fund is registered in Saint Helier, Jersey, the company has to keep in mind the hefty tax liability on its exit as there is no double taxation avoidance agreement (DTAA) protection in Jersey. "Soft-Bank's fund is registered in Jersey and they are suffering a huge tax liability because there is no DTAA protection with Jersey".

Multi-brand retail chains can own up to 51 percent of their investment in India, and single brand retail (i.e. Apple, Nike) is now up to 100 percent.

PhonePe, which is far behind India's biggest mobile payment platform Paytm, has been gradually getting closer to its rival in the UPI-based payment. "With Walmart on board, we are committed to doing more of the same".

Although working together, Walmart and FlipKart will maintain their separate brands in the country, where Flipkart already has a well-defined presence and where Walmart India already operates 21 Best Price cash-and-carry stores and one fulfilment centre in 19 cities across nine states in the country.

Related Articles