Walmart is planning to become the largest stakeholder in Flipkart, India’s biggest e-commerce player.
The retail giant is in advanced talks to buy between 20 and 26% of the company from investors like SoftBank and Tiger Global Management, eventually increasing to a 51% share in FlipKart, according to India’s Economic Times.
Walmart will pay $7 billion to become FlipKart’s largest stakeholder, according to Bloomberg.
This move increases Flipkart’s valuation to about $20 billion, up from $12 billion last year, according to researcher CB Insights.
Both Amazon and Walmart want to grow in India and China, where Alibaba makes it difficult to break into the market. Alibaba Group Holding backed local upstart Paytm E-commerce Pvt, a FlipKart competitor.
Expanding into India’s market — where e-commerce sales are projected to reach $28 billion by 2020, according to estimates from Kotak Institutional Equities —will help the Bentonville, Ark.-based retailer push back against the $5.5 billion Amazon has pledged to invest in the country, as the two retail giants continue battling to be the only company that sells people things.
The investment could be a win for both Walmart and FlipKart.
“Walmart will make Flipkart a stronger rival to Amazon,” said Arvind Singhal, chairman of the New Delhi-based retail consultancy Technopak Advisors. “Strategically, combining forces makes sense for both.”
Getting Walmart involved is good for the grocery business, where it’s imperative that FlipKart be competitive, according to Satish Meena, an analyst at research firm Forrester.
“A deal with Walmart can give [FlipKart] leverage into offering grocery online through a combination of offline and online channels,” he told CNBC.
Flipkart was Walmart’s “best available option” to access India’s growing retail market, Meena said.
