Flipkart to acquire loss-making Wallmart India, will launch Flipkart Wholesale next month

The Flipkart Group on, July 23, 2020, announced the launch of Flipkart Wholesale, a new digital marketplace. Flipkart will acquire 100% stake in Walmart India Private Limited, which operates 28 Best Price stores across the country, engaged in cash-and-carry business.

Flipkart said that “Kiranas and MSMEs are central to India’s retail ecosystem and Flipkart Wholesale will focus on meeting their needs by providing small businesses a wide selection at significant value.”

Interestingly, in 2018, the Flipkart Group was acquired by the parent company Walmart Inc.

Business of Walmart India Pvt. Ltd.

· Walmart India Pvt. Ltd. is the loss making arm of American Global major, Walmart Inc.

· In fiscal 2019, the Walmart India Pvt. Ltd. reported revenue of INR 4,095 Crore, on a loss of Rs172 Crore.

· Walmart India Private Limited currently operates 28 Best Price Modern Wholesale stores, across the country, which is engaged in cash-and-carry business. Best Price Modern Wholesale stores currently support more than 1.5 million members, including kiranas and other MSMEs.

What is cash and carry business?

"Cash-and-carry" refers to a business model that virtually excludes all credit transactions and requires up-front payment for all goods and services.

The significance of the deal

· As disclosed by the Flipkart Group, the acquisition will unveil a new digital marketplace, known as Flipkart Wholesale, which will focus on meeting the needs of kiranas and Micro, Small and Medium Enterprises (MSME) by providing small businesses a wide selection at significant value.

· The pilot run of Flipkart Wholesale will commence from August, 2020. Initially, it will be launched with the wholesale categories of fashion and grocery. It will have one-stop access to an extensive selection of products with attractive schemes and incentives.

· The store owners will be given access to easy credit options and will be supported by various Flipkart initiatives to help them survive the difficulties of the COVID19-affected market and to grow in the future.

· Kalyan Krishnamurthy, the Chief Executive Officer, Flipkart Group, said, “The acquisition of Walmart India adds a strong talent pool with deep expertise in the wholesale business that will strengthen our position to address the needs of kiranas and MSMEs uniquely.” He further added, “it will draw on the merchandising experience of Walmart India, strong relationship with brands, and the twelve-plus years of operating Best Price,”

· The acquisition will enable Flipkart to expand its business-to-business (B2B) vertical and lock horns with the rivals, Amazon and Reliance’s JioMart, who are engaged in the similar business.

Deal Valuation

· The Flipkart Group acquired Walmart India Pvt. Ltd. at an undisclosed amount.

· However, last week, Flipkart Group had received a fund infusion of $1.2 billion led by Walmart, along with a group of existing shareholders. The investment values the company at $24.9 billion in post-money valuation.

Legal Implications

· The legal structure of the deal entails that the Walmart India will be a separate legal entity within the Flipkart Group, and its employees, will be transitioned to the Flipkart Group, and the home office teams will integrate over the next year.

· Flipkart Wholesale will be headed by Flipkart veteran Adarsh Menon. And the CEO of Walmart India, Sameer Aggarwal will remain on board to help smooth the transition, before heading off to another assignment inside Walmart Inc.

The investments of Global majors, like Walmart Inc., Amazon, and the Indian billionaire Mukesh Ambani, among others, exhibits the development potential that the Indian markets offer. With the internet and smartphones becoming more and more accessible, the sectors of the Indian society that had previously been untapped are also one of the reasons why the Indian markets are offering significant growth potentials.