During Walmart’s Q4 earnings call, CFO John David Rainey noted that the global retail giant is particularly pleased to see Flipkart’s positive contribution margin expanding.

“Any eCommerce or any digital platform needs infrastructure that you can scale at a low marginal cost. And that’s what Flipkart has done. They’ve invested in that infrastructure over the last three years, so now we are able to see that contribution profit continue to expand. So, we’re excited about that,” Rainey added. The US-based company holds a majority stake in Indian ecommerce major Flipkart and fintech platform PhonePe. 

Overall, Walmart reported a revenue of $164 billion in Q4FY23, up 7.9 per cent in constant currency. In the earnings call, Rainey noted that a lot of “Walmart’s revenue growth comes from Flipkart, in particular.”

Interestingly, Walmart recorded a 72 per cent drop in operating income (constant currency terms) as compared to Q4FY22, due primarily to costs incurred towards separation of Flipkart and PhonePe ownership. 

PhonePe was recently spun off from Flipkart as a separate business owned by Walmart. The fintech company has changed its domicile from Singapore to India. These developments were followed by PhonePe raising a new funding round from General Atlantic at a valuation of $12 billion. 

Addressing the jump in PhonePe’s valuation to $12 billion, Rainey said the valuation was supported by the fintech company’s annualised TPV reaching more than $950 billion (about 50 per cent higher than just one year ago) and the platform exceeding 4 billion monthly transactions.

Further, the PhonePe and Flipkart separation was “analogous to eBay and PayPal, where each of them operating independently can pursue their own initiatives and they don’t necessarily need to be tied together.” This is an opportunity for both businesses to unlock and realise more value independently than they can by themselves, he added. 

Judith McKenna, President & Chief Executive Officer-Walmart International, Walmart, Inc. said, “when we first invested in Flipkart, PhonePe was just four months old. Its annualised TPV (total payment value) was in the tens of millions of dollars. As that business has grown and as the Flipkart business has grown, we recognise that each has been successful and we’re setting them up on a path for long-term success.”

She added that it is impressive that Flipkart’s contribution margins are positive and have been consistently positive for some time. “That sets Flipkart up well, not only from a cost perspective in terms of the infrastructure investment that we’ve made for the eCommerce business, for their delivery and distribution business, but also the way they’re working on their margin mix,” said McKenna.

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