Is Walmart chasing a mirage in Flipkart with the $16-billion acquisition?

Flipkart will need $2 bn annual profit to make Walmart investment viable, which will mean yearly revenue of $100 bn

Walmar, Flipkart
Representative Image

Is Walmart chasing a mirage by acquiring Flipkart at a total valuation of nearly $21 billion? A back of the envelope calculation suggests that Flipkart would need to generate an annual net profit of around $2 billion (Rs 135 billion at the current exchange rate) for Walmart to get a 10 per cent return on its initial investment in the company. This will require Flipkart to become a $100-billion (Rs 6,700 billion) company in terms of revenues within the next few years, given it achieves a net profit margin similar to that of Walmart’s, at 2.1 per cent. Amazon.com too has a ...