Why the association is more likely than a stake sale

The world’s largest retailer, Walmart, which is in direct competition with Jeff Bezos-led e-commerce giant Amazon in the US, may be looking at India, the fastest-growing market, for the next round of business rivalry.

A news report on Tuesday said Walmart was in early talks to pick up a minority stake in Flipkart, which claims to be bigger than Amazon in India.

While neither Benton villeheadquartered Walmart nor Sachin Bansal and Binny Bansal-founded Flipkart commented on the issue, a source said it may not make much sense for the American brickand-mortar giant, with significant online ambition, to pick a minority stake in Flipkart at the valuation it commands.

The Bengaluru-based company had past estimated its own value at over $15 billion last year, but many of its investors have marked down the worth since then. Even after the markdowns, which are theoretical, Flipkart is valued at $10-$11 billion.

“A minority stake in Flipkart will not give Walmart any substantial play in the online space, while paying a big price for it,” the source said, explaining why such a deal was unlikely.

The talks between the two could be for other strategic tieups, rather than a stake deal, another source said. Walmart has been in negotiations with several e-commerce companies, including Shopclues and Snapdeal, for presence across online platforms. However, many analysts have pointed out that there’s a reason for Walmart to gain traction in the online market in India.

The biggest trigger is Chinese online major Alibaba finalising its direct India foray. In fact, in China, Walmart invested $1.5 billion to pick up a 5 per cent stake in JD.com, or Jingdong Mall, formerly 360buy, to compete with Alibaba.

Amazon, which has been investing heavily in India — $5 billion committed in the last three years — is a natural rival since Walmart has been trying hard to take on Bezos’ company in the home market.

When it comes to partnership, Walmart has not had a happy past in India. It had entered in a partnership with Sunil Bharti Mittal-led Bharti Enterprises for a wholesale business.

The JV’s plan was to subsequently open retail stores, where 51 per cent foreign direct investment was permitted in 2012 under the United Progressive Alliance (UPA) government. But the partnership broke in 2013 as the multibrand retail policy was not going anywhere and the two partners developed differences.

Currently, Walmart operates a wholesale business in the country, which allows 100 per cent FDI.

Besides, at 21-odd wholesale stores that it runs in India, Walmart offers online services in the business to business space. The American retailer is also exploring the possibility of entering the food retail business, where 100 per cent FDI has been allowed.