India’s retail market could face a major upheaval soon if Walmart can close a big deal with e-commerce giant Flipkart. According to Bloomberg, Walmart hopes to acquire a controlling interest in Flipkart for $12 billion or more and announce the agreement in as many as two weeks. Bloomberg, which cited sources in its report, said that the entire Flipkart board has signed on to the investment. If Walmart can clear a few more hurdles to get the deal done, the company could soon be a prominent player in India’s exploding retail market.
With a population of 1.3 billion and recent changes that pave the way for a more competitive business environment, India is widely viewed as the next big frontier for companies to do business. But because of some difficult regulations that have kept foreign companies at bay, many of India’s corporate leaders are local organizations.
American companies, hoping to capitalize on India’s gigantic consumer base, have been lining up to enter the market and acquisitions have proven to be an important way for them to gain a foothold.
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For Walmart, the implications are clear. Flipkart is India’s biggest and most popular online retail company and has quickly cemented itself as the go-to place for consumers to buy products. While Amazon had reportedly considered at least partnering with Flipkart, the Indian company’s board ultimately decided that Walmart would be a better acquiring party, according to Bloomberg’s sources. Walmart stands to face fewer regulatory problems and could ultimately get its deal done more efficiently, the sources said.
But Amazon isn’t standing idly by. Instead, the company has already said that it’s willing to put $5.5 billion into India in the coming years and has already started making modifications to its site’s policies and design to play within government regulations and attract Indian shoppers. The moves have helped Amazon capture market share from Flipkart and establish itself as a worthy alternative.
Walmart, meanwhile, has done little in India. But a Flipkart acquisition clearly positions the retailer as a direct competitor to Amazon and opens yet another front in their international battle.
According to the report, Walmart could ultimately acquire between 60% and 80% of Flipkart through the transaction. The deal then would value Flipkart at $20 billion.