Walmart inches closer to sealing deal with Flipkart

Walmart inches closer to sealing deal with Flipkart

The Bengaluru-based ecommerce giant recently spend a total amount of about $350 million to buy shares of smaller investors.

Walmart, world's largest retailer based out of the US, is close to clinching a deal to buy a majority stake in India's leading ecommerce company Flipkart for roughly between $15 billion and $20 billion.

According to sources familiar with the development, the deal will witness some of the biggest investors in Flipkart offloading their stake.

The formal announcement of the deal and exit of investors will be announced at any day, said a source familiar with the development. 

"Along with Walmart, the deal will also witness the participation of Alphabet, the parent company of search engine Google. Both companies will buy 75% stake in Flipkart," said an analyst.

Japan's SoftBank Group Corp and Tiger Global Management said they will be selling almost all of their about 20% stake each in Flipkart.

The second largest investor in Flipkart is South Africa's Nasper Ltd, which is expected to hold a small number of shares after the Walmart deal. Other investors, including Tiger Global, Tencent Holdings Ltd and Microsoft Corp are expected to retain small stakes.

Sachin Bansal, who had co-founded Flipkart with Binny Bansal 11 years ago, could retain their stake or sell over 5% stake. However, this could not be independently confirmed.

According to Chief Executive of advisory services firm GrowthEnabler Rajeev Banduni, the deal will Walmart a foothold in the world's fastest growing economy with a market of 1.3 billion people.

"Wallmart with its bricks-and-mortar experience will get Indian ecommerce platform Flipkart to take on the growing opportunity in Indian ecommerce where mobile penetration has brought in real difference,"said Banduni.

Flipkart is a registered public company in Singapore with nearly 145 entities as shareholders. The Bengaluru-based ecommerce giant recently spend a total amount of about $350 million to buy shares of smaller investors.

According to sources, JP Morgan Chase as Walmart’s banker in the deal and Amarchand Mangaldas as legal advisors, and Bain & Co. as management consultants. Flipkart has various firms representing from Singapore.

Indian ecommerce is witnessing competition among Amazon and Flipkart and they have pumped in billions of dollars towards marketing and setting up infrastructure in the country.

Flipkart was last valued at about $12.5 billion when it raised $2.5 billion from Masayoshi Son's SoftBank last year. US-based fund house Valic, which holds around 4,502 shares in Flipkart, and Vanguard World Fund, which has four lakh shares, have pegged the valuation of the ecommerce company between $15 billion and $19 billion.

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

India's $30 billion ecommerce market is expected to grow to $200 billion by 2026, states Morgan Stanley.