INDIA – Walmart is in talks to pay several billion dollars for as much as 20% of India e-commerce leader Flipkart Online Services, according to a person familiar with the matter.
The world’s biggest retailer would invest in Flipkart as part of a proposed deal that would increase the start-up’s valuation to as much as US$20bn, said the person, asking not to be identified because the matter is private.
Flipkart’s valuation had been about US$12bn, according to researcher CB Insights. The talks are at an advanced stage, but terms could still change and the deal may not be finalised, said the person.
The e-commerce battle in India has intensified in the past year as global competitors have zeroed in on the country’s potential — and market leader Flipkart.
Amazon.com founder Jeff Bezos has vowed to spend US$5bn to gain ground in the country as e-commerce catches on, while China leader Alibaba has backed local upstart Paytm E-commerce in the fray.
“Walmart will make Flipkart a stronger rival to Amazon,” said Arvind Singhal, chairman of the New Delhi-based retail consultancy Technopak Advisors.
“Strategically, combining forces makes sense for both.”
Flipkart and Walmart did not respond to requests for comment.
An alliance with Walmart would give Flipkart additional capital and retail muscle to fight back against the rising competition.
Bloomberg News reported Walmart’s talks with Flipkart in 2016.
Since then, Japan’s SoftBank has invested US$2.5bn in Flipkart, including the purchase of shares from some early investors.
India is the next big potential retail prize after the US and China, where foreign players have made little progress against Alibaba.
India’s online market is projected to reach US$28billion by 2020, according to estimates from Kotak Institutional Equities.
Walmart has few choices to expand in the market beyond Flipkart, with Amazon on one side and Alibaba on the other.
Snapdeal.com, a once thriving e-commerce provider, has lost ground and support from early backer SoftBank.
The Japanese company, which held almost a third of Snapdeal shares, had pushed a merger with Flipkart to create a stronger competitor to Amazon.
That deal fell apart after Snapdeal’s founders raised objections.
“Walmart doesn’t have much of a choice in India,” said Singhal.
“They either have to go it alone or partner with someone else as Indian e-commerce has the potential to become really big.”