Flipkart's stake acquisition'credit positive' for

Walmart's acquisition of 77 per cent stake in Flipkart is "credit positive" for the US retail giant, though the Indian e-commerce firm is expected to continue to make losses for the next few years, said rating agency Moody's in its Credit Outlook report issued today.

On May 9, Walmart Inc said it is buying a 77 per cent stake in Indian e-commerce retailer Flipkart for about USD 16 billion, but it is yet to disclose financing plans.

Moody's said it expects the deal to initially weaken Walmart's credit metrics, with retained cash flow (RCF) to net debt ratio likely dropping to the low-30 per cent range from 40 per cent currently and debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio likely to double from 1.6 times currently.

"Despite this deterioration, the acquisition is credit positive because it provides immediate scale in India's burgeoning retail e-commerce sector and we expect that a combination of increased cash flow and debt reduction will push the RCF/net debt ratio back above our 35 per cent."
India has more than 400 million millennials, a growing middle class and exploding smartphone penetration, all of which are critical as shopping continues to shift online, the rating agency said, adding "Following the announcement, we affirmed Walmart's Aa2 rating and stable outlook."