How Naspers could get $4bn from Walmart’s Flipkart deal
Hong Kong/Mumbai — Naspers could raise nearly R4bn by selling its 16.6% stake in Indian e-commerce player Flipkart to Walmart.
Reuters reported last week that Walmart completed its due diligence on Flipkart and had made a proposal to buy 51% or more of the Indian company for between $10bn and $12bn.
Walmart is negotiating with Flipkart’s early investors Naspers, Tiger Global and Accel, and the deal may be concluded by the end of June, two people with direct knowledge of the matter told Reuters.
A deal with Flipkart would step up Walmart’s battle with Amazon.com for a bigger share of India’s fledgling e-commerce market, which Morgan Stanley estimates will be worth $200bn in a decade. Local media have reported that Amazon is exploring a possible counter offer for Flipkart.
Both sources declined to be named as the talks are private.
Walmart would buy both new and existing Flipkart shares, with the new shares expected to value the Bengaluru-based firm at at least $18bn, the sources said. The price for existing shares would value the firm at about $12bn, one of the people said.
Japan’s SoftBank Group, which owns about 20% of Flipkart via its Vision Fund, was unlikely to sell any of its shares due to the low price being offered for the existing shares, this source said.
A deal was not yet finalised, and talks between Walmart, Flipkart and its investors were ongoing, one of the people said.
Flipkart also counts eBay, Tencent Holdings and Microsoft among its investors.
Flipkart did not respond to a request for comment, a representative for Walmart in India declined to comment while SoftBank said it did not comment on speculation.
Big Indian battle
For Walmart, the world’s largest retailer known for its superstores, a deal with Flipkart would open up the vast Indian market.
Walmart has for years tried to enter India but has remained confined to a "cash-and-carry" wholesale business amid tough restrictions on foreign investment. It currently operates 21 such stores in India.
By comparison, Amazon closely trails Flipkart, which along with its fashion units controls nearly 40% of India’s online retail market, according to estimates by researcher Forrester.
Flipkart’s investors are concerned that any deal with Amazon would run into regulatory hurdles as a combination would have more than 70% of India’s online retail market, one of the sources said.
Walmart’s push into e-commerce comes as Amazon has embraced offline retail, with an affiliate of the Seattle-based company picking up a $27.6m stake in Indian retailer Shopper’s Stop.
In the US, Amazon also bought high-end grocer Whole Foods Market for $13.7bn last year.
Walmart’s investment would give Flipkart not just additional funds to fight Amazon, but also arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management.
Former Amazon employees Sachin Bansal and Binny Bansal founded Flipkart in 2007 in India’s tech hub of Bengaluru.
Like Amazon’s founder Jeff Bezos, they began by selling books, but have diversified rapidly, including by selling smartphones, such as those made by China’s Xiaomi, through exclusive flash sales, and now compete with Amazon in almost all product categories.