Wal-Mart Is in Talks to Invest in Flipkart --Update
September 28 2016 - 1:29PM
Dow Jones News
By Rick Carew, Preetika Rana and Sarah Nassauer
Wal-Mart Stores Inc. is in discussions with Flipkart Ltd.,
India's largest e-commerce company by sales, about investing in the
startup, according to a person familiar with the situation.
If the two sides agree on some way to join forces, Wal-Mart
could gain a better foothold in Asia's third-largest economy, a
market that has long eluded the world's largest retailer. It would
also give Flipkart much-needed capital and a powerful partner in
its battle against Amazon.com Inc. to become the dominant online
retailer of the South Asian nation.
Some investors valued Flipkart at $9 billion this year,
according to a banker familiar with the company. That compares with
a $15 billion valuation when it gained investor funding last
summer.
Flipkart held discussions with Chinese e-commerce company JD.com
Inc. for a possible investment a few months ago, but that didn't
result in a deal, a person familiar with the matter said.
A Wal-Mart investment in Flipkart would be in line with a recent
shift in the retailer's e-commerce strategy aimed at remedying
years of sluggish online growth and competing with the increasingly
formidable Amazon.
Earlier this month, Wal-Mart completed its acquisition of U.S.
online discounter Jet.com Inc. for $3.3 billion, the largest-ever
purchase of an e-commerce startup. In June, Wal-Mart sold its
Chinese e-commerce business to JD.com, the second-largest online
retailer in China after Alibaba Group Holding Ltd., in exchange for
a 5% stake in JD.com.
Wal-Mart's e-commerce sales last year reached nearly $14
billion, or 3% of its total revenue of $482 billion, but quarterly
e-commerce growth has slowed in recent years. Amazon's revenue was
$107 billion last year, including its web-services business, its
growth outpacing that of Wal-Mart.
Analysts say a Flipkart investment could help Wal-Mart make
inroads in a country that has otherwise been challenging for the
Bentonville, Ark.-based retailer's brick-and-mortar operations.
In 2013, after years of lobbying for greater access to India's
1.2 billion consumers, Wal-Mart shelved plans to build supermarkets
in the world's second-most populous nation, saying the rules for
the venture were too tough. Indian law requires that foreign
retailers source at least one-third of their merchandise locally.
Wal-Mart currently operates 21 wholesales stores in India, none of
which are allowed to sell directly to consumers.
For Bangalore-based Flipkart, which blossomed into India's
largest e-commerce company from a small online bookstore, a
Wal-Mart alliance would bolster its fight against Amazon and other
Indian competitors, such as Jasper Infotech Pvt.'s
Snapdeal.com.
Amazon, Uber Technologies Inc. and other startups have turned to
India -- one of the last big untapped frontiers for big global
brands -- as China's economy slows. Some experts estimate that
about 50 million people, or 4% of India's population, regularly
shops online, but believe the market will someday bloom as China's
did. Morgan Stanley predicts Indian online sales will hit $100
billion a year by 2020, up from $3 billion in 2013.
Flipkart and other Indian startups, however, have been finding
it tougher to raise money in recent months as investors tighten the
purse strings. Indian e-commerce startups have burned through
millions of dollars funding deep discounts on everything from
smartphones to shoes, and analysts expect a shakeout in the
sector.
Meanwhile, Amazon said earlier this year it planned to invest an
additional $3 billion in India, taking its total investment in
India to $5 billion.
Write to Rick Carew at rick.carew@wsj.com, Preetika Rana at
preetika.rana@wsj.com and Sarah Nassauer at
sarah.nassauer@wsj.com
(END) Dow Jones Newswires
September 28, 2016 13:14 ET (17:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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