Walmart set to buy stakes in Flipkart

American retail major Walmart is in talks to acquire majority stakes in Indian e-commerce giant Flipkart. If the deal gets through it will heat up the competition in the Indian retail industry, which has listed players including Avenue Supermarts, Future Retail, Future Enterprise, Trent, Shopper Stop, V-Mart Retail and Reliance operated stores.

According to news agencies, the proposed deal values Flipkart at US$18 billion to $20 billion. In 2007, former Amazon employees Sachin Bansal and Binny Bansal founded Flipkart with its base in Bengaluru. The company holds close to 45 per cent market share in the Indian e-commerce space and is closely followed by Amazon with around 40 per cent market share.

The American giants Walmart and Amazon are both keen on expanding their market share in India. To counter Walmart's deal, Amazon has offered a rival bid with an attractive breakup fee of up to $2billion payable to Flipkart if the deal (Amazon-Flipkart) fails to get through.

Flipkart is backed by cash-rich venture capitalist including Softbank, Tencent, Tiger Global, Microsoft, Accel, Naspers and others. SoftBank Group's Vision Fund with its US$ 2.5 billion investment is Flipkart's biggest stakeholder and is unlikely to participate in the Flipkart-Walmart deal. SoftBank finds the valuation offered by Walmart low. Microsoft and Tencent are expected to stay invested, while Tiger Global, Accel and Naspers are expected to sell their stakes to Walmart.

Amazon already has interests in the Indian retail business through an 5 per cent holding in Shopper's Stop. While Walmart operators 21 big-box stores in ‘cash-and-carry’ model in India. The company's expansion in Indian retail sector is restricted by tough foreign investment policies. Flipkart's expertise in pricing, logistics and supply chain management will help boost Walmart's presence in India

Among retail stocks, during the morning session, Avenue Supermarts was trading at Rs. 1,487.20 per share, down 0.41 per cent, Trent was at Rs. 351.00 per share, up by 0.29 per cent, Future Retail was at Rs. 610.95 per share, up by 2.91 per cent, Reliance Industries was at Rs. 944.85, up by 0.81 per cent, Shoppers Stop was at Rs. 588.00 per share, up by 0.08 per cent.