Flipkart investors set to make merry after Walmart deal

Even as Walmart is set to gain a strong foothold in the Indian ecommerce market, once it acquires Flipkart, a bunch of investors who will be exiting the homegrown ecommerce giant will have the last laugh.

Major investors in Flipkart including SoftBank, Tiger Global and Naspers along with other investors like Accel Partners, have made the deal a battle of investors as they even brought on Amazon to increase the valuation of the company.

Walmart is planning to buy 60% to 75% stake in the Indian ecommerce company by spending at least $14.6 billion to $16 billion in a combination of cash and stock deal. According to sources familiar with the development, the counter bid by Amazon was necessitated by the growing clout of the ecommerce market of India going forward.

“The Indian ecommerce market is expected to grow from $38.5 billion as of 2017 to $188 billion by 2025, and is expected to surpass the US to become the second largest ecommerce market in the world by 2034,” said Rajeev Banduni, chief executive of advisory services firm GrowthEnabler.

Flipkart is a registered public company in Singapore with nearly 145 entities as shareholders. Walmart is planning now to narrow it down to 50 and wants to make it a private limited company in India and Singapore.

SoftBank, the largest investor in Flipkart with around 25% stake, is expected to sell all its shares and will get maximum benefit out of this deal. “As per the proposed deal, SoftBank Group will sell its over 20% stake through an investment fund at a valuation of roughly $20 billion,” sources privy to the development said.

Besides Tiger Global, which controls around 20%, Flipkart has investors like Naspers holding around 14% and early investor Accel Partners.

Flipkart’s cofounders Sachin Bansal and Binny Bansal, who hold 5% share each, will continue to hold their stake and be part of the company after the deal, sources said.

Flipkart’s decision to buy back shares for a total amount of about $350 million has made smaller investors richer. Investors who have exited the firm include Shekhar Kirani of Accel, Deep Nishar of SoftBank and IDG Ventures. Also, large number of pension funds and smaller investors also gained money.

According to a research report by Forrester, Flipkart along with its fashion subsidiaries Myntra and Jabong, control nearly 40% of India’s online retail market. Its competitor Amazon is a close second with a 31% share.

Indian ecommerce market is facing a consolidation with Flipkart joining hands with Walmart. Other players including Amazon, PaytmMall and ShopClues will have to further focus to take on the online and offline strategy of Flipkart in India, analysts added.