Flipkart’s Walmart tie-up brings cash and muscle

MUMBAI: India's leading e-commerce company looks set to team up with Walmart Inc, garnering the startup a valuation of as much as US$20 billion (RM79.14 billion) in return for a stake that could be as large as 20 per cent, Bloomberg's Saritha Rai reported on Friday.

There’s a lot that Flipkart Online Services Pvt could do with around US$4 billion in cash.

More to the point, having a giant like Walmart in its corner will go a long way towards fending off Amazon.com Inc, which itself has pledged to spend US$5 billion in the world’s second-most-populous country.

There was a time when Snapdeal.com would rate a mention in the competitive landscape, but the decision of its founders to veto a merger with Flipkart relegates that outfit to the sidelines.

Eighteen months ago, there was talk of Walmart pumping US$1 billion into Flipkart in a move that would have merely inflamed the market.

Today, a much bigger investment in what’s almost a twohorse race makes more sense.

With Amazon’s rise in the US putting the brakes on Walmart’s revenue growth, which has averaged 3.4 per cent annually over the past decade from 12.8 per cent the prior 10 years, the bricks-and-mortar retailer needs to find fresh ways to fend off The Everything Store.

Amazon has little footing in China, which leaves India and its huge middle class. A deal that Walmart signed with Bharti Enterprises Pvt over a decade ago hasn’t amounted to much, so tapping an e-commerce startup is smart.

Cash isn’t everything to Flipkart. What it can really gain from having a big brother like Walmart is access to a much wider catalog of products, and the negotiating power that comes with US$360 billion in annual spending.

Few suppliers globally don’t hope to sell to Walmart, and with such a tie-up, Flipkart would be on most VIP lists.

Walmart would also be aware of the benefits, not least the chance to boost revenue after four years of sub-two per cent growth.

If this deal goes through, you may well expect Flipkart to Save Money, and Walmart to Live Better.

BLOOMBERG PIC Flipkart’s tie-up with Walmart looks likely to give the startup access to a much wider catalog of products, and the negotiating power that comes with US$360b in annual spending.