Comments
Walmart is learnt to be just days away from acquiring a majority stake in Flipkart, despite Amazon’s higher bid, as investors in the homegrown e-commerce major believe that a deal with the former may face fewer regulatory hurdles.
The deal may be inked as early as Monday.
Spokespersons for both Flipkart and Walmart insisted that no deal has been signed yet.
“An Amazon-Flipkart partnership will create a monopoly in the e-commerce market and bring it under regulatory glare,” observed Vidhya Shankar, Executive Director, Grant Thornton India.
“However, since Walmart does not have a B2C online commerce presence in India, it will face far fewer regulatory hurdles. Moreover, even if Amazon’s bid is more attractive than Walmart’s, Flipkart would not like to risk losing its identity and become Amazonised.”
Deal facilitation
Meanwhile, Flipkart has concluded another buyback of shares from its investors in what appears to be a procedure aimed at converting it into a private company under Singapore law, which will allow Walmart to complete the acquisition of an over 55 per cent stake more easily than if it were a public company.
According to documents filed by Flipkart with authorities in Singapore, sourced by business intelligence platform Paper.vc, the e-commerce major bought 1,895,574 redeemable preference shares and 1,74,319 non-redeemable preference shares for $350.46 million from a set of existing investors in a transaction that closed on April 27, 2018.
The buyback pegs Flipkart’s valuation at $17.69 billion, though it is expected that Flipkart’s final valuation in the Walmart deal will be around $20-21 billion.
Exiting funds
The exiting shareholders are Shekhar Kirani of Accel, Deep Nishar and a large number of pension funds.
IDG Ventures has exited the holdings of two of its funds including its domestic fund (Pandara Trust Scheme), but remains a shareholder via one of its overseas fund entities. Other investors including Tiger Global, Accel, Microsoft, Naspers and eBay will remain on the capitalisation table of Flipkart.
Sources said that once the acquisition is completed, Walmart will most likely pump in an additional $2 billion to expand the business, set up more fulfilment centres and rope in more sellers.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.