India likely to be largest market in the world this year: Walmart CFO

John David Rainey, CFO Walmart, said during an investor conference that Walmart-owned Flipkart and PhonePe have exciting opportunities and have large portions of market share in India

India is likely to surpass China and emerge as the largest international market for Walmart this year, said John David Rainey, chief financial officer and executive vice president, Walmart, Inc. The US retail giant is the owner of the e-commerce company Flipkart and fintech firm PhonePe.

“You noted China and India, really excited about both those markets, excited about what's going on in our other markets as well. But those are two markets that certainly are faster growing,” said Rainey at the Raymond James 44th Annual Institutional Investors Conference on Tuesday evening.

“In India, we have Flipkart and PhonePe. I was in India just last year… to meet with those teams and understand what they're doing,” said Rainey while responding to an analyst’s question related to the long-term opportunities, investments and returns in these markets.

“And both (are) really exciting opportunities. Both have large portions of market share there. And I think the opportunity and what I guess believe India is going to be the largest market in the world this year, surpassing China. It's a really promising opportunity in the future,” said Rainey.

The retail industry in the country is likely to see 10 per cent annual growth to reach about $2 trillion by 2032, according to a BCG-RAI report. The sector is at the "cusp" of having innovations in both physical and e-commerce through the use of new cutting-edge technologies, according to the experts. In India, Walmart-owned Flipkart competes with players such as Amazon, Meesho, Reliance's JioMart and Tata Group.

Rainey’s comments come at a time when Walmart has been at the forefront of retail modernization in China since 1996, when it opened a hypermarket and Sam’s Club in Shenzhen. It now serves communities nationwide as a leader in omnichannel retail. It provides services to customers through nearly 400 stores and clubs as well as multiple e-commerce platforms. Chinese associates make up 99.9 per cent of the total workforce. Walmart China is led by Xiaojing Christina Zhu as president and chief executive officer.

When asked to comment on the early stages of China’s reopening from Covid-19 restrictions, Rainey said that “it has been really good.”

“Our Sam's stores in China are two of our biggest and best stores in the entire club network. Quite impressive with what's going on over there and a huge opportunity. And that really appeals to the value proposition over there, slightly different than what it is here, appeals to a little different customer segment as well that resonates,” said Rainey.

In February, Rainey said in a post-earnings call that a lot of the firm’s gross merchandise value and revenue growth come from Flipkart. But, Walmart International, which includes Flipkart, struck a cautious note in its economic outlook for 2023. The retail major’s forecast of full-year earnings was below estimates while posting net sales of $27.6 billion for the quarter under review. This was a growth of over 2 per cent year-on-year.

Walmart International's business took a hit in the fiscal fourth quarter with its operating income plummeting 65.3 per cent mainly owing to the separation of its Indian entities Flipkart and PhonePe.

A partial separation was announced in December 2020. The PhonePe Group was acquired by the Flipkart Group in 2016 and is now India's largest digital payments platform. The company has more than 440 million registered users.

Last year in December, e-commerce giant Flipkart and PhonePe announced the full ownership separation of the digital payments platform, setting the two businesses to chart their own paths and unlocking enterprise value for shareholders.

However, PhonePe’s investors had to pay about Rs 8,000 crore in taxes to allow the fintech firm to domicile in India from Singapore.

Last month, the PhonePe separation from Flipkart Group was also mentioned in Walmart’s earnings. This contributed to an operating cost increase of 262 basis points (bps). Walmart International’s gross profit rate also increased by 52 bps for sale events. This included Flipkart’s flagship Diwali sale of BigBillionDays.

Flipkart is purportedly trying to conserve cash and focus on profitability amid an uncertain macroeconomic environment.  The firm will not be handing out increments to its senior leadership in the Grade 10 and above category — that includes roles as diverse as managers to vice-presidents — in a ‘difficult decision’ that is likely to impact 4,500 personnel. However, 70 per cent, or 10,500 employees, below the level of a manager, will receive an increment this cycle.

Late last year, Flipkart Chief Executive Officer Kalyan Krishnamurthy had said India cannot be isolated from the impact of the current global macroeconomic environment. He had said Flipkart was cutting down spending across new experiments, capital expenditure, and the firm would be more cautious in acquisitions and businesses in an uncertain macroeconomic climate.