Global retail giant considers investing in India's largest e-commerce company

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 29, 2016 02:48 ET (06:48 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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