Walmart Inc. is closing in on a deal that would give the company a leading position in India's online retail market as it battles Amazon.com.
The Bentonville retailer is leading a group that could invest about $15 billion to take a 75 percent stake in Flipkart Group, according to multiple reports Friday. Bloomberg News, citing people familiar with the matter, said Flipkart's board had approved an agreement based on those terms and that the deal is expected to close within 10 days. The outlet said terms could change and a deal isn't certain.
A Walmart spokesman declined comment Friday.
Taking control of Flipkart would be a significant, and pricey, decision in the retailer's plans to reshape its international business by focusing on markets with growth opportunities. The reported terms would be Walmart's largest deal since acquiring U.K. grocery chain Asda for $10.8 billion in 1999.
Walmart announced earlier this week it was selling Asda to rival Sainsbury's in a $10.1 billion agreement. Walmart would retain a 42 percent stake in the joint venture, which is subject to regulatory approval. The deal would free up about $4.1 billion in cash for the company.
Raja Kali, an economics professor in the Sam M. Walton College of Business at the University of Arkansas, Fayetteville, said purchasing Flipkart would open a potentially big e-commerce market to Walmart.
India has a population of about 1.3 billion and a growing middle class, which Kali said is attractive to foreign retailers like Walmart and Amazon. He said mobile phone use is rapidly rising in the country, which is playing a role in the growth of India's e-commerce market.
India's online sales of roughly $20 billion are relatively small. But the Mint newspaper in India, citing research data from Morgan Stanley, projects online sales to climb to $200 billion by 2026.
"Flipkart is already very successful in India," Kali said. "So by buying Flipkart, Walmart gets a ready-made successful partner who has already mastered the intricacies of delivering small quantities."
Flipkart was founded in 2007 by two former Amazon employees. The site sells products like electronics, appliances, clothing, furniture and sporting goods to consumers.
The company has faced growing competition from Amazon.com, which has made hefty investments into its business in India the past few years. Flipkart controlled 35.7 percent of the online market share in India in 2017, while Amazon had 27.7 percent according to data from Euromonitor Passport.
A deal with Walmart would provide Flipkart with a global company possessing retail expertise and funding to continue fueling its competition with Amazon.
Meanwhile, Walmart has a small physical retail presence in India with about 20 wholesale stores and plans to build about 50 more over the next several years.
Sales growth has been limited largely because of government regulations that prevent foreign retailers who stock their shelves with multiple brands to sell directly to consumers.
Walmart's India stores -- Best Price Modern Wholesale -- sell to business owners. But the company has previously stressed the importance of having its foot in the door in India.
"India is a market, over time, that I think, whether it's 10 years, 20 years, 30 years from now, we'll be glad we're in India, and I think there's a lot of growth opportunities there," Walmart Chief Financial Officer Brett Biggs said last June during the dbAccess Global Consumer Conference.
Flipkart would open an opportunity for Walmart to extend its reach, according to analysts. Neil Stern, a senior partner with retail consultant firm McMillan-Doolittle, said the retailer appears willing to spend the money to secure a larger slice of business in one the world's fastest-growing markets.
The move also would give Walmart an opportunity to correct previous missteps in large global markets like China. The company acquired a smaller player in Yihaodian several years ago, but struggled to compete against e-commerce giant Alibaba as it gobbled up market share. Walmart eventually sold its e-commerce business to China's second-largest e-commerce company, JD.com, two years ago.
Walmart now controls a 12 percent stake in JD.com.
"They've always been playing catch-up in China," Stern said. "Amazon has outpositioned them in a number of other markets. In this case, they could potentially outposition Amazon in India, and they are willing to pay -- and overpay -- for that opportunity."
Business on 05/05/2018