Wal-Mart are in advanced talks to invest in India’s online retailer Flipkart.
SAN FRANCISCO (Diya TV) — Wal-Mart Stores Inc. are reportedly in the advanced stages of talks to invest as much as $1 billion into India’s Flipkart Online Services Pvt, an alliance that could help the companies battle Amazon.com Inc. in e-commerce, according to a person familiar with the matter.
Wal-Mart, already the world’s largest retailer, would take a minority stake in Flipkart under the proposed agreement. Final terms of the deal haven’t been worked out and negotiations are still underway, however, Flipkart’s most recent valuation was about $16 billion, according to research firm CB Insights.
Flipkart serves as India’s largest online retailer, but its lead has been under assault as Amazon steps up investments in the country. Chief executive Jeff Bezos said in June that he plans to spend another $3 billion in India to gain customers in the fast-growing market. A deal with Wal-Mart would give Flipkart additional capital to fight back and more expertise in battling the e-commerce pioneer.
“If the deal goes through, the competitive intensity between Flipkart and Amazon will shoot up,” said Gautam Chhaochharia, the Mumbai-based head of India research at UBS.
India is the next big potential retail prize after the U.S. and China, where foreign players have made little progress against Alibaba Group Holding Ltd. India’s online market will expand at an average of 45 percent annually in the next four years and reach $28 billion by 2020, according to estimates from Kotak Institutional Equities.
Arkansas-based Wal-Mart had earlier established a retail joint venture in India with Bharti Group, which runs the country’s largest telecommunications operator Bharti Airtel. But the venture failed to ever gain traction and Wal-Mart eventually sold its stake to its partner. If a Flipkart deal materializes, Wal-Mart would be able to support its new ally with money and its decades of retail experience.
“With its main competitor Amazon getting very aggressive, Flipkart needs a solid partner to bolster its operations with not just capital but also branding, logistics, sourcing and other retail experience, they won’t be able to pull it off with small partners,” said Devangshu Dutta, CEO of the Gurgaon-based retail consulting firm Third Eyesight.