BENGALURU: US-based retail giant Walmart is leading a fresh infusion of $1.2 billion in Flipkart, two years after it acquired 77% stake for $16 billion, as the battle for the online retail market gets ready for the entry of Mukesh Ambani’s Reliance Industries. The investment — which will be done in two tranches this financial year — values the company at $24.9 billion, over 13% premium from $22 billion at the time of the acquisition in 2018. Walmart’s shareholding will go “little over 80%” with this round of infusion.
The companies said in a statement that “group of existing shareholders” also participated in the round, though it did not specify names. The remaining major shareholders include China’s Tencent and New York-based Tiger Global, both of which own 5%, besides Microsoft and co-founder Binny Bansal.
The capital will be used for the online retail business of Singapore-registered Flipkart — which also includes fashion portal Myntra — where the company has been locked in market share battle with US-based Amazon. The group’s payments unit PhonePe has been looking to raise capital separately and spin-off its business to unlock further value. TOI had reported last year that PhonePe is in talks with existing backers like Tencent to raise $1 billion and has been seeking a valuation of at least $8 billion.
“Flipkart continues to leverage its culture of innovation to accelerate growth and enable millions of customers, sellers, merchants and small businesses to prosper and be a part of India’s digital transformation,” said Judith McKenna, President and CEO of Walmart International, in a statement.
Walmart’s buyout of Flipkart has been one of the largest M&A deal in India’s corporate history, but the company also faced setbacks due to changes in FDI norms for e-commerce in early 2019 which led to the company restructuring the operations. It has also seen exit of Group CEO Binny Bansal after allegations of improper conduct, while Kalyan Krishnamurthy runs the e-commerce business and Sameer Nigam runs PhonePe reporting directly to Flipkart board.
Satish Meena, the senior forecast analyst at market research firm Forrester, said the competition among Walmart, Amazon India and Reliance’s Jio Mart will get more aggressive that will play out in the next 12-18 months as the pandemic pushes online commerce growth. In terms of areas where Walmart’s new capital will be allocated, Meena said, there are three primary segments–grocery and food retail, digitising small sellers and businesses and experiments around video and social-commerce. “They are looking at aggressive expansion in grocery, which wasn’t in focus earlier but that has changed after Covid-19. Their food retail license was not approved but they are rectifying it and you can expect significant investment to go there,” he added.
Flipkart said that it has surpassed 1.5 billion visits per month and reported 45% growth in monthly active customers and 30% growth in transactions per customer for FY20. It has 150 million products across more than 80 categories. TOI recently reported that both Flipkart and Amazon India have seen their shipments increase to 120-140% of pre-Covid-19 pandemic levels as consumers increasingly prefer online sales rather than venture out to physical stores.