Flipkart Deal Good for India, Says Walmart CEO

Christopher Davidson
May 12, 2018

Furthermore, SoftBank's Son, who in October 2014 had committed to investing $10 billion in India within a decade, remains bullish on the country.

The big-box giant is right to pay up for the chance to make a big splash in India. Product platform Flipkart's market leadership in fashion wear (through Myntra and Jabong), coupled with a wide portfolio of cellphones and appliances should provide Walmart with a well-established base to sell its own products.

F Flipkart was founded in 2007 by the former Amazon executive Sachin Bansal along with its IITian batch mate Binny Bansal.

Three investors in particular will see quick and big windfalls as part of the deal, even as some hold onto shares in the Walmart-guided e-commerce company. That includes its decision last month to sell its British unit, Asda, which primarily operated a chain of traditional supermarkets.

Opposing the deal, the Confederation of All India Traders on Monday wrote to Commerce and Industry Minister Suresh Prabhu demanding a government scrutiny of the merger, claiming that the deal will encourage more loss-funding and predatory pricing by ecommerce majors.

Flipkart had net sales of $4.6 billion in its latest fiscal year. So India's retail market is about the same as Walmart's annual turnover. Walmart now operates 21 Best Price cash-and-carry stores and a fulfillment center in 19 cities across nine states in India, which will continue to be led by Krish Iyler, President and Chief Executive Officer of Walmart India.

Flipkart is, in some ways, an echo of Amazon.

Current Flipkart employees may be allowed to liquidate 50% of their vested Esops during the first year, with former employees being allowed only 30% of their vested Esops, according to sources familiar with the matter. Free for 14 days - no credit card required! Tiger was one of the earliest investors in Flipkart, tracing back to an investment of $9 million in 2009. Flipkart now has over 100 million registered users and more than 100,000 registered sellers.

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Flipkart's supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.

As the hands-on manager, Krishnamurthy has won the loyalty of the rank and file at Flipkart in the last two years and it seems Walmart was keen to have just one CEO controlling things.

Walmart works on an wholesale cash-and-carry business model and now has 21 stores in the country.

That's because Walmart has bet on a segment of India's retail market which, although expected to grow, will continue to remain small.

The world's largest retailer will take a 77% stake, valuing the Indian company at more than $20bn. However, by no stretch of the imagination does this mean Amazon's business in India is doomed, with Bezos and co investing a further USD$5bn (£4.2bn) into their business in the country at the end of previous year.

Ashwani Mahajan, SJM co-convenor, has written to Prime Minister Narendra Modi and commerce minister Suresh Prabhu, to seek their intervention to block the Walmart-Flipkart deal as FDI is not allowed in multi-brand retail.

"The grocery business is hard", said Bill Dreher, a retail analyst at Susquehanna Financial Group.

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