Walmart Inc and Flipkart do not foresee any regulatory hurdles in concluding their agreement, even as the $16-billion deal has thrown up many imponderables, whose answers only time will provide.
While questions about Sachin Bansal’s decision to exit and whether Walmart is making a backdoor entry into India, among others, are being raised, Walmart CEO Doug McMillon and Binny Bansal, Co-founder and CEO, Flipkart, preferred to pitch the deal as the perfect synergy between two like-minded entities.
Underplaying the market’s concerns, McMillon said that if a long-term view is taken on the decision then it is positive, but if a short-term view is taken then it may look different.
Stating that Walmart prefers to work in a decentralised manner, he said that to the extent possible, the business would be run through the board. He said a team of ‘avengers’ was being put together on the Board.
Asked about the equity structure in place for the deal, Binny Bansal said: “We were clear that the equity structure remains the same except that investment comes in from Walmart.”
On Sachin Bansal bowing out, Binny said it was not easy to let him go, but it was a personal call. “…more than anything it was a very emotional decision. Sachin and I go a long way,” he added. McMillon and Bansal, along with Walmart India CEO Krish Iyer, and Flipkart CEO Kalyan Krishnamurthy, were sharing the intent behind the deal at an Editors’ roundtable here.
Walmart’s approximately $16-billion investment includes $2 billion of new equity funding. Its initial ownership stake in Flipkart is 77 per cent, with the rest held by some of Flipkart’s existing shareholders, including co-founder Binny Bansal, Tencent Holdings Ltd, Tiger Global Management LLC, and Microsoft.
‘No question of a monopoly’
While the partners expect to close the deal by the end of financial year 2019, subject to regulatory approvals, Bansal and McMillon do not see regulatory hiccups. Though the two maintained that there was no issue of a monopoly in this deal, it remains to be seen how the CCI will look at it. It also remains to be seen if it will attract capital gains tax or not.
Asked if there were concerns among Walmart investors on the deal as the company’s share price fell as soon as it was announced, McMillon said: “It had more to do with the time horizon of the investors — whether they are taking a long-term view or a short-term view of the deal.”
Besides, the share price movement of a day does not influence long-term decisions, he said.
Job creation
Trying to ease the concerns being raised in some quarters, including the Swadeshi Jagaran Manch, the team maintained that the deal would lead to the creation of more jobs and promote ‘Make in India’.
The Swadeshi Jagaran Manch has written to Prime Minister Narendra Modi raising questions on the deal and terming it a back-door entry by Walmart into India. “It is to be noted that nowhere in the world, Walmart has a marketplace model,” Ashwani Mahajan, All-India Co-Convenor, Swadeshi Jagaran Manch, said in the letter.
The letter was also marked to Minister of Commerce and Industry Suresh Prabhu.