Mumbai: India's richest business tycoon Mukesh Ambani has a probable competitor in the retail space. This time its not related to Amazon, but the other major ecommerce player of India - Flipkart.
Reports have surfaced that Walmart Inc (Flipkart) and Tata Group were looking at a deal in the latter's Super app.
On Tuesday, news of a probable deal caught investors imagination. Bloomberg reported that the Tata Group was looking at potential suitors for a stake for its digital platorm.
News agency Mint broke the story of Walmart Inc reportedly considering investment in Tata's 'Super' app. According to people cited by this report, Walmart, a key owner in Flipkart (owns 66 percent), was likely to spend $20 - 25 billion with Tata. This is higher than the money spent to buy a stake in Flipkart ($ 16 billion).
According to Mint, Goldman Sachs has been roped in as the lead banker for the proposed deal.
The information is yet to be confirmed by Walmart or by the Tata Group, However, significant volumes were spotted on domestic exchanges, especially on stocks of Tata Group such as Tata Motors, TCS, and Tata Steel. All three posted gains during the intra-day session.
A deal between Tata Group and Walmart (Flipkart) could add to synergies. Tata Group already has a massive retail presence via consumer facing businesses such as Titan, Trent, Cliq and Croma. Tata Group also has a strong portfolio in products such as Tata Salt, Tata Tea, Westside, and Tata Motors. This could pose as a challenge to Reliance's Retail vision.
With the news yet to be confirmed, murmurs are fast spreading through markets. There is also probability in a Flipkart Tata merger. Himanshu Nayyar, lead analyst at Yes Securities shares an opinion, "The high valuation being talked about for the deal makes us wonder about the need for Walmart to do a large equity infusion in Tata given it already has a strong platform in Flipkart and can achieve these objectives by entering into a normal business tie-up..."
"...But if this were to go through, it would indicate a more strategic intent from Walmart to partner with a trusted brand to drive its India business ambitions which might also include a merger of Flipkart with the Tata Platform in the long term. It might also be necessary for Walmart in case Amazon and Reliance Retail decide to join hands."
The super App is expected to be launched some time in December.