Walmart and Amazon battle it out for a controlling stake in India's largest e-tailer, everyone wants to know which US-based giant is likely to offer a better deal to lure Flipkart investors.
According to a Bloomberg report, the country's biggest e-commerce company is leaning toward selling a controlling stake to Walmart rather than Amazon, because of the greater certainty in such a deal.
The Jeff Bezos-founded e-commerce behemoth is keen on buying Flipkart at a time when US retail giant Walmart is closing in on a USD 21-billion deal for a 55 percent stake in Flipkart. For Amazon, India has been a major growth market, more so, after it was compelled to give up on its China ambitions.
The report quoted sources saying that Flipkart's board recently met to discuss the competing proposals and thinks Walmart could close a deal more quickly and smoothly. Flipkart founders Sachin and Binny Bansal also favour Walmart because they would continue to help lead the business, it said.
Flipkart's deal with Walmart is likely to encounter fewer regulatory hurdles because it has no online retail presence in India. While a deal with Amazonn, the second-largest e-commerce player in the country, is likely to come under the scanner of antitrust watchdog CCI.
Walmart has been trying to buy a stake in the Flipkart since 2016. Back then, the US retailer wanted to acquire 25-51 percent in Flipkart through a USD 7 billion deal.
In March, news reports said that SoftBank was planning to sell a part of its stake in Flipkart to Walmart. The Japanese company had pumped in USD 2.5 bn in Flipkart in August 2017, in addition to the USD 1.4 million infusion by Microsoft, Tencent and eBay. SoftBank could pocket about USD 2 billion if it sells part of its stake to Walmart.
Besides SoftBank, Flipkart counts New York-based Tiger Global, Accel Partners, Naspers and IDG Ventures as its backers. All the investors are looking to sell a portion of their holdings in Flipkart.
Flipkart and Amazon controls over 75 to 80 percent of the Indian ecommerce market. A merger of this magnitude can have its own benefits. "There are 1.2 million shipments happening in ecommerce every day. Consumerism in India is growing fast. But it is very difficult for a brand like Flipkart, even if you have the money," Sreedhar Prasad, partner and head of consumer markets, KPMG India, told FactorDaily.
India has close to 100 million online shoppers comprising the aspirational middle class. According to government figures, between 2004-05 and 2011-12, the lower middle-class population almost doubled from 237.8 million to 446.3 million, the middle middle-class zipped to 108.5 million from 45.4 million, while the upper middle-class population was up from 21 million to 49.5 million. The next generation shoppers, especially the younger ones, will book everything from mobiles to fashionwear on e-commerce sites, said Prasad. – Business Standard