Walmart-Flipkart deal: Will it be fruitful for India, 10 points

13 May, 2018, 02:39 | Author: Mary Valdez
  • Not an easy path

The Bentonville, Arkansas-based retail behemoth Walmart Inc yesterday announced acquisition of 77 per cent stake in Flipkart for about Dollars 16 billion in its biggest deal till date.

Inc42 on Thursday decoded the tax implications of the Flipkart-Walmart deal, "In this entire deal, which saw Flipkart's valuation at around $20.7 Bn, there is still no tax clarity as the treaties signed by India with Singapore and Mauritius changed previous year", the report said.

"There's certainly going to be a bright-light audit on Japan", said Bill Dreher, an analyst at Susquehanna International Group.

The government of India has been loathe to allow big worldwide groups to start super market chains in India, fearing that do so will drive customers away from small, mom-and-pop shops. The acquisition pegged Flipkart's valuation at 4.5 times FY18 EV/sales, which is much higher than that of Future Lifestyles, Aditya Birla Fashion & Retail, Shopper Stop and Future Retail and compares well only with those of Avenue Supermarts and Titan.

Despite this, super markets and hyper markets continue to be prohibited territory to global companies.

In the official statement announcing the move the company said, "eBay has notified Flipkart and Walmart that it intends to sell its holdings in Flipkart, which will represent gross proceeds of approximately $1.1 billion".

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.

Walmart's aggressive bidding to outdo rival Amazon in India's e-retailing race and the fact that it would take years before its India investments really fructify (Flipkart is seen making losses for the next couple of years) appear to have disappointed its investors.

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WalMart "will be able to embrace a Phygital approach in India", it said.

Although working together, Walmart and FlipKart will maintain their separate brands in the country, where Flipkart already has a well-defined presence and where Walmart India already operates 21 Best Price cash-and-carry stores and one fulfilment centre in 19 cities across nine states in the country.

"We now have 21 stores and plans to open 50 stores in 4 to 5 years". As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market.

After almost two years of speculation and talks between the two companies, Walmart has finally acquired Flipkart for USD$15bn (£11bn).

Aghi went on to say, "The deal will create good competition, which benefits customers and is good for sellers on the platform". McMillon, however, said he saw no problems in getting support for the deal.

Besides, "it is much more hard for the government to control and regulate foreign owned platforms particularly in e-commerce sector which has no boundaries", Khandelwal said.

"While Amazon has AmazonNow, Flipkart would like to tap Walmart's supply chain expertise in building up its Grocery offerings".

Amazon has a dominant position selling to millennials online, and it may be hard for Walmart to unseat its rival.

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