Flipkart all set to turn into Walmart? Insiders claim USD 15 billion deal for a 75 percent stake in the homegrown desi startup says report

Last Updated: Sun, May 06, 2018 15:49 hrs

Flipkart, the company founded by Sachin and Binny Bansal, has agreed to an in-principle deal with the Arkansas based Walmart, the world's largest physical retailer at a valuation of nearly $20 billion, according to news reports from Bloomberg and Reuters.

The report from Bloomberg said that Flipkart was likely to sell three-fourths or 75% of its stake to Walmart for $15 billion.

The deal is expected to be formalized in the coming ten days, and will see Japanese investor SoftBank Group sell its over 20% stake in the Indian e-tailer.

There is no official word on the how much existing stakeholders could off-load in the sale, but as on February 2018, here are the major stakeholders in Flipkart (from various sources):

  • SoftBank Group- 23.6%
  • Tiger Global- 20.5%
  • Naspers- 13%
  • Binny Bansal- Nearly 5.5%
  • Sachin Bansal- Nearly 5.4%
  • Others: Includes Tencent Holdings, Accel Partners, and Microsoft

Sources were quoted by other news-reports as saying that SoftBank could exit the model completely, as it did not favour being a passive investor.

There has been no official confirmation on whether the Bansals would stay or exit the business that they founded. Another speculative story however hinted that Binny Bansal may sell his 5.5% stake in Flipkart and grow rich by $2.75 billion. This version calculated the valuation at $12 billion. Under the new valuation of $20 billion however, Binny Bansal, could be richer by over $3 billion in case he agrees to a sell-out.

Another surprise element in this speculative news that has gripped the industry, is that of participation from Google's parent company Alphabet Inc. It is widely speculated that Alphabet is participating with Walmart for a small stake, making the acquisition exercise all the more exciting.

A Walmart-Google partnership in the US has already seen Walmart products being sold on Google Express, Google's online mall. This also enables US customers with Google Home to order Walmart products by saying them out aloud.

Besides news reports, regulatory filings also confirmed the arrival of a new investor. Filings showed Flipkart buying back shares worth $350 million from investors to convert its Singapore-incorporated company to a private limited firm. The move is likely to ease the way for a new investor.

Amazon, the number two e-tailer in India after Flipkart, will be observing the development closely. The desi Flipkart managed to retain a whopping 40% of India's online market (together with Jabong and Myntra), while Amazon came a second with a 31% marketshare (data from Forrester). This not only compelled Amazon's Founder Jeff Bezos to commit an additional fund of $5.5 billion in India, but also lead to various reports that Amazon was eyeing a stake in Flipkart.

Amazon has steadfastly remained mute amid the speculation, but reports said it was seeking legal opinion on how the Competition Commission of India worked before pitching an offer.

A change of management, infusion of fresh funds and the onboarding of players like Walmart and Google may mean additional headache for Amazon. And it is unlikely that the Seattle based Amazon may watch the buyout across the fence, especially in a market that is estimated to grow to $200 billion in a decade.

Although the Walmart-Flipkart looks more probable, it would still have to pass through regulatory approvals, and important among them would be the approval from the Competition Commission of India.

Although news of Flipkart hitting jackpot was good news, sources added that the deal was still not a definitive one, with a firm handshake on the deal expected within 10 days. There is a probability that the terms could shift including even the likelihood that the entire deal could fall out of favour with both the parties.