Amazon to Get One More Contender in Its Fight for Flipkart

The Beast of Bentonville to get Google on its side in a competition with Amazon for Flipkart.

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Amazon to Get One More Contender in Its Fight for Flipkart
Alphabet to take-over Flipkart.

Speculations are being made that Walmart’s procurement is likely to involve Alphabet in its quest for taking a minority stake in the Bengaluru based company, Flipkart, one of the largest e-commerce company in India. However, the news is not official yet, however people with knowledge of the matter said that Google’s parent company, Alphabet in all probability will invest $1-2 billion.

Amazon’s rapidly growing retailing clout will once again face some serious challenges as Alphabet and Walmart collectively are all set to pose as arch-rivals but this time in a foreign market. Walmart’s products are being sold on Google’s online mall, Google Express, as a part of partnership counterfeited in the U.S. last year. Simultaneously, the tech giant also offers custom-made voice shopping for online Walmart products.

Google has been planning to roll out midrange products like premium speakers, smart speakers, intelligent home automation product, and smartphones for Indian markets. It has already started exploring Indian retailing markets by showcasing Pixel smartphones with pop-up outlets in numerous malls.

Walmart has allegedly offered to purchase 85%-86% of Flipkart by a blend of primary and secondary investment. Instead of directly investing $2-2.5 billion in Flipkart, Walmart is planning to get the shareholding of individual investors.

The chances are that SoftBank, which owns 20.8% shares, will completely exit in the first stage whereas, the U.S. based Tiger Global Management and China’s Tencent which collectively own 26.5% share will exit partially in the preliminary round.

In the chorus, Walmart is negotiating with the co-founders of Flipkart Binny Bansal and Sachin Bansal to purchase their stakes investments. However, the final decision is yet to be taken. Some of the significant shareholders of the company include U.S. based online marketplace eBay, early investor Accel Partners, and South African media multinational Naspers.

Walmart will later have the option to purchase the remaining investments and sell them later. This, in turn, will later give the U.S. retailer full ownership in Flipkart, eliminating Alphabet’s investment.

The deal will be akin to Hutchison Essar’s acquisition by the phone company Vodafone in 2007. The Indian investor Essar had the choice to sell its stake to the UK based company at the same estimation at which Hutchison withdrew from the company.

Walmart may probably experiment with the option of listing Indian division as it did in Mexico. This will further help in price discovery if some investors decide to walk out through that direction.

Kalyan Krishnamurthy, CEO of Flipkart, recruited by Tiger Global Management in 2016 will not be replaced. Walmart has been planning to buy Flipkart over a year and now it looks like it is ready to give a tough time to Amazon who has successfully deep-rooted itself in the Indian e-commerce market.

If the deal is finalized it will be one of the biggest victories for the Bentonville beast. Prior to that in 2016, Walmart had acquired Jet.com for $3.3 billion.

After-Effects:

K Srinivas Reddy of Juniper Investments reportedly said that with such an investment in a large consuming and rapidly growing economy like India, job creation would experience a big boost directly and indirectly. Owing to the changing buying preferences and convenience, India will become a $3 trillion economy, further fueled by Walmart’s investments.

Walmart has been in dire straits since its arrival in India in 2007 in a joint venture with Bharti Enterprises.

After the split between Bharti Enterprises and Walmart in October 2013, Walmart has been going at snail’s pace in spreading the roots of cash-and-carry business it acquired after purchasing 50% stakes of Bharti Enterprises in the joint venture.

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