Walmart & Alphabet Together May Buy Over 70% Stake in Flipkart

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Retail behemoth Walmart is going to make its boldest bet in India on Wednesday when it announces the acquisition of just over 70% stake in e-commerce player Flipkart, as the USA retailer's chief executive Doug McMillon lands in Bengaluru.

The logo of India's e-commerce firm Flipkart is seen on the company's office in Bengaluru, India April 12, 2018.

Bentonville, Arkansas-based Walmart will acquire about a 60 percent stake in Flipkart, while Alphabet will get a roughly 15 percent stake in the online marketplace for about $3 billion, one of the sources said.

With this deal, the US retail giant has thwarted rival Inc., which had reportedly made a bid valued at $22 billion to $23 billion for a 60% share of Flipkart, eclipsing an earlier proposal by Walmart of around $20 billion for a 60% stake. However, this could not be independently confirmed.

Many analysts see it is a Flipkart's well-calculated strategy to take on Amazon by investing in these companies. There are various advantages associated with the deal between Walmart and Flipkart.

It further demanded that the government form a regulatory authority for e-commerce and till the authority is formed, no such deal be allowed.

SoftBank declined to comment.

Walmart is expected to get three board seats at Flipkart and will also have a say in the appointments of the group's finance, legal and compliance heads, sources said to Reuters.

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As well as Softbank, it is also backed by New York-based fund Tiger Management. Flipkart's existing shareholders, China's Tencent Holdings and US-based Tiger Global Management, will exit partially and retain small stakes, but remain on the board.

- Flipkart Group's consolidated loss attributable to owners of the company in fiscal 2017 widened to 87.70 billion rupees, from 52.16 billion rupees a year earlier. The deal however fell apart after Snapdeal's founders decided against the deal. The valuation for 70-75 per cent is expected to be in the vicinity of $15.2 billion, even as Flipkart will be valued at $20 billion. But this was inevitable, and probably the only way Flipkart would have stood up to competition from Amazon.

On Monday, the ToI reported quoting sources that Walmart is ready to rope in more investors over the next few years, while keeping India's biggest ecommerce company's operations in line with its India game plan.

This deal will certainly go a long way to help Flipkart beat Amazon in India.

Amazon and Flipkart are locked in an intense battle for leadership in the Indian market and have pumped in billions of dollars towards marketing and setting up infrastructure in the country.

In India Amazon has also been on an aggressive expansion spree individually.

Experts said although both the buyers and sellers are based outside India and the target company Flipkart Pvt Ltd is also Singapore-based, a tax liability can not be ruled out given that a substantial value in the target company is derived from India.

Flipkart at first sold books, later expanding to sell music, movies, games, electronics and mobiles, the category that has driven growth.