Walmart Inc, world’s largest retailer is all set to clinch a mammoth deal to buy a majority stake in Indian e-retailer for roughly $15 billion. The deal, which will see some of the biggest investors in Flipkart offloading their stake in the country’s largest e-commerce company, could be announced any day now.
Japan’s SoftBank Group Corp and Tiger Global Management are said to be selling almost all of their about 20 per cent stake each in Flipkart. Accel Partners, Tencent and Naspers also have stakes in Flipkart.
After the deal, Walmart will likely end up with 60-80 per cent of Flipkart. Walmart has valued Flipkart at about $20 billion, say reports. Flipkart was valued at about $12 billion last year, according to researcher CB Insights.
Why deal matters to Walmart
- Walmart, which failed to make an entry in India in offline retail space, can now sell its products online to 1.3 billion population of the country.
- Post the acquisition, Walmart will expand its online retail business.
- Walmart will also get access to other online players like E-Kart, Jabong and Phone-Pay
- Walmart will own Flipkart’s 21 ware houses. It will also get access to Flipkart’s 10 crore customers.
Two stocks that tend to lose
Walmart’s entry will increase competition for listed retailers like Future Consumer, D-Mart. Walmart may keep prices low in the beginning to gain market share.
Stocks that tend to gain
i) Just Dial, Infibeam
- Companies into e-commerce space will benefit from Walmart’s entry because that will push their valuations higher.
ii) Hotel stocks: Indian Hotels, Asian Hotel (West), Kamat Hotel, Mahindra Holidays
- Walmart may focus on building hotel network as it did in US.
- Hotel companies will receive Walmart products at discount over market price.
iii) Venky’s, SKM Egg, Apex Frozen
- Walmart’s business expansion plans will help these companies.
iv) Warehousing companies: Everest Ind, GDL, HIL
- Walmart will improvise its warehousing network.
- These companies may receive orders to build warehouses.
v) Logistic firms: Gati, Blue Dart, Allcargo, Sical
- Re-rating of logistics sector possible post the Walmart-Flipkart deal.