In 2018, Walmart Inc acquired a nearly 77 per cent stake in Flipkart by investing $16 billion
Walmart Inc-backed retail organisation Flipkart is keen on raising $2 million to $3 billion at an annual valuation of over $40 billion, The Mint reported. According to sources, the Indian firm plans to use this capital to expand its product range in India to challenge other ecommerce competitors, including Amazon and Meesho, AJIO by Reliance Retail and Tata Neu.
Currently valued at over $40 billion, Flipkart is likely to dilute its 7 per cent shares to raise this capital, the Mint report stated.
Last July, the ecommerce giant raised $3.6 billion in a funding round led by parent Walmart Inc and returning investor SoftBank Group Corp. The online retailer was valued at $37.6 billion at that time.
The Walmart-owned e-commerce platform's cash and cash equivalents fell to $1.1 billion at the end of the July 2022 quarter, down from $2.2 billion at the end of January 31, 2022.
Walmart's filings with the U.S. Securities and Exchange Commission said, "As of July 31, 2022, and January 31, 2022, cash and cash equivalents of $3.5 billion and $4.3 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions. Of the $3.5 billion on July 31, 2022, approximately $1.1 billion can only be accessed through dividends or intercompany financing arrangements subject to the approval of the Flipkart minority shareholders; however, this cash is expected to be utilised by Flipkart."
Flipkart continues to hold a strong position in India's ecommerce sector. According to a RedSeer report, its order share stood at 49 per cent, with a 62 per cent market share in gross merchandise value (GMV) in the first week of the festive sale earlier this month.
In 2018, Walmart Inc acquired a nearly 77 per cent stake in Flipkart by investing $16 billion. It planned to take the Indian ecommerce major public within four years. In April 2022, Flipkart raised an Initial Public Offering (IPO) valuation target of $60 billion to $70 billion and planned to list in the U.S. exchange in 2023, The Economic Times reported.
Walmart Inc now wants the unicorn to expand its product range and increase its net revenue in the Indian market. The US-based retailer will likely bring strategic investors on board to help it fulfil this objective.
However, the Walmart-Flipkart association has been fraught with contention over the years. Local traders, worried that the behemoth would drive small and medium-sized offline retailers out of business, staged protests across India against Walmart's $16-billion acquisition of Flipkart in 2018. They even planned to go to the Supreme Court and the Competition Commission of India (CCI) to block the transaction.
The CCI, however, approved this acquisition within the first phase of the investigation, stating that it is "not likely to have an appreciable adverse effect on competition in India."
Earlier this year, the CCI raided some of the offices of Flipkart and Amazon India. "It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the O.P.s are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act," the industry watchdog had said at that time.
The Confederation of All India Traders (CAIT) lauded this move, claiming it vindicated the trade body's unrelenting complaints against the ecommerce majors and their anti-competition practices.
"The seizure of records will amply substantiate the charges made by CAIT against Amazon and Appario. Beside these two sellers, other top 20 sellers of Amazon in the last five years should also be properly scanned since Amazon is flouting all laws and FDI policies of the Government and trying to create a monopolistic market in India for a long time and there is no transparency on Amazon e-commerce portal thereby causing huge damage to small retailers of the Country and collateral damage to the consumers," CAIT said in a statement.