Walmart Inc. (WMT) is in talks to become the largest investor in one of India’s leading e-commerce companies, people familiar with the matter told Bloomberg, a move that would pit the Bentonville, Arkansas-based behemoth against its biggest rival, Amazon.com Inc. (AMZN), in one of the fastest growing online retail markets.
Bloomberg reported that Walmart is keen to buy about a third of Flipkart Online Services Pvt by purchasing stakes from its biggest shareholders, Tiger Global Management and SoftBank Group Corp. (SFTBF). The retail giant is reportedly willing to spend about $7 billion to make the deal happen, a figure that would value the Indian startup at about $20 billion.
Negotiations are at a critical stage, said the sources, adding that important terms, such as the price and size of the stake, could be liable to change. If all goes according to plan, it’s possible that a deal could be struck later this month.
India's Economic Times separately reported that Walmart could buy a 20-26% stake and increase its shareholding to 51% in tranches. Sources speaking with ET said the firm could invest up to $10-$12 billion for the stake.
One of the biggest hurdles that Walmart faces at this stage of negotiations, according to Bloomberg's report, is convincing SoftBank to relinquish some its stake in Flipkart. While Tiger Global is reportedly happy to sell at least some of its position in the Indian company, SoftBank, the startup’s largest other shareholder, is believed to be eager to retain a substantial holding. To appease these demands, Flipkart is weighing up whether to issue new shares. Other investors in Flipkart include China's Tencent Holdings Ltd (TCEHY), eBay Inc. (EBAY) and Microsoft Corp. (MSFT).
Flipkart is reportedly keen to secure outside investment in a bid to fight off the rising threat of Amazon. Walmart, which has similarly struggled to compete against Amazon in the U.S. market, will view this challenge as a perfect opportunity to take on Amazon in a region it has a solid foothold in. (See also: Walmart Cheated to Vie With Amazon: Former Exec.)
Should Walmart succeed in its efforts to purchase a major stake in Flipkart, it will suddenly find itself going head-to-head with Amazon in another important market. The Bentonville, Arkansas-based giant has already proved that it's willing to invest heavily to maintain its status as the world’s largest retailer. Beating Amazon in India, home to a fast growing ecommerce market serving 1.3 billion people, would represent a huge boost in its bid to reassert dominance. (See also: Walmart to Expand Online Grocery Delivery to 100 Metros.)