In a $3.5 Billion Deal, Walmart Increases Its Stake in India's Flipkart

In a bold move, Walmart has invested a staggering $3.5 billion this year in purchasing shares from select Flipkart stakeholders and settling obligations with certain PhonePe shareholders. This strategic move underscores Walmart's strong commitment to the Indian market, even as its global rival, Amazon, takes a more cautious approach by reducing its investments in South Asia.

This substantial investment of $3.5 billion occurred within the first half of 2023, as revealed in a recent SEC filing by Walmart. As a result, Walmart's ownership stake in Flipkart has surged to approximately 80%.

In recent developments, several notable investors, such as Tiger Global, Accel, and Flipkart co-founder Binny Bansal, have divested their holdings in Flipkart this year. This information was revealed in a prior filing made by Flipkart. Notably, Tiger Global, in a disclosure earlier, reported a substantial gain of $3.5 billion from its $1.2 billion investment in Flipkart, marking a significant success story in the South Asian market.

Meanwhile, Walmart, the majority owner of PhonePe, and a company that has poured in excess of $20 billion into these two ventures, is now intensifying its commitment to the Indian e-commerce and payment platforms. This strategic move comes at a time when various other corporations, including Amazon, have opted to curtail their expenditures in the Indian market.

To put this figure in perspective, Amazon plans to invest less than $2.5 billion on its e-commerce platform in India in the next seven years.

Amazon, which has invested over $11 billion on its e-commerce group and AWS in India in the past decade, plans to invest $15 billion more by 2030. Of this $15 billion, Amazon has earmarked $12.7 billion for its cloud business.

In an earnings call last month, Walmart said PhonePe and Flipkart are continuing to demonstrate impressive growth.

“Flipkart delivered strong GMV and net sales growth as the core business continues to grow well,” said Walmart CFO John David Rainey.

“The team continues to work on expanding the ecosystem of product and services like advertising, travel, and healthcare, and on delivering continued contribution profit improvement. Flipkart’s consistent progress and performance reinforces our confidence in the long-term value of this business.”

India has emerged as a key battleground for global firms as they race to find their next billion customers.

In a recent fund letter, Baron Capital declared, "India is the new China and is set to become the world's fastest-growing major economy in the coming decade and beyond."

They firmly believe that India represents the most alluring long-term investment opportunity within their investment universe. Factors such as economic reforms, rapid digitization, formalization of various sectors, and an increase in credit penetration all play into the hands of well-managed, forward-looking public companies.

PhonePe, that used to be a subsidiary of Flipkart, has attracted significant investments totaling $850 million in recent quarters. These investments have come from a range of notable backers, including General Atlantic, Tiger Global, and Walmart, following its separation from the e-commerce company.

Source: Manish Singh for TechCrunch