Walmart-Flipkart deal in 2 weeks; majority stake unlikely for US firm

For Flipkart, the investment from Walmart will not only give it resources to compete with Amazon in India, but also access to expertise, and in-depth knowledge of retail

US retail giant Walmart is close to finalising its acquisition of a significant stake in Flipkart, and the deal is likely in the next 10-15 days. However, Walmart might not become the majority shareholder in the company as it had initially proposed.

Multiple sources privy to the developments said SoftBank’s initial reluctance to allow Walmart to take a controlling stake in Flipkart has been addressed, and the Japanese investor is willing to let the US firm become the largest shareholder in the Bengaluru-based company.

“Talks are proceeding quite positively and in every possibility the deal will be closed in the next 10-15 days. All the investors are okay with Walmart being in the driver’s seat,” said a senior executive at one of the firms that has invested in Flipkart, who did not wish to be named.

Flipkart will issue 20 per cent new shares to Walmart, which will amount to an investment of $4-5 billion at a valuation of $19-20 billion, a two-fold jump over the company’s valuation when it raised $1.4 billion in a funding round led by Tencent in April last year.

A secondary component, equal in value to the primary investment Walmart will make in Flipkart, will be used to give exits to some of Flipkart’s earliest investors such as Accel Partners, Tiger Global, Naspers and IDG Ventures. Walmart’s total shareholding after the investment could be closer to 40 per cent, according to the latest discussions.

“There will be a primary component and a secondary component of equal size. The exact shareholding pattern is currently being worked out,” said another person close to the development. 

Both Flipkart and SoftBank spokespersons declined to comment. However, sources within Flipkart confirmed that the valuation of the company will be far higher in this upcoming investment round. Attempts to reach out to some of the other investors in Flipkart did not elicit any responses.

“It is going to be great for Accel Partners and Tiger Global. This is what they have been waiting. From Walmart’s perspective, Flipkart is the ideal candidate because it sits between Amazon and Alibaba,” said Manish Maheshwari, former head of Flipkart’s marketplace business.

An investment in Flipkart by Walmart has been in the works for over a year now as the Bentonville-headquarterd company does not want to lose India, the last large open market in the world, to Amazon with which it competes fiercely in its home market. While Amazon is largely focused on winning India’s e-commerce battle, Walmart could take the fight offline.

For Flipkart, the investment from Walmart will not only give it resources to compete with Amazon in India, but also access to expertise, global best practices and in-depth knowledge of retail.