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Is Walmart Closing in on a Deal with Flipkart?
As a big player in the Indian e-commerce market, sizeable shares in the company could prove valuable for both Walmart and Amazon, and sources say a deal could be closed as early as June.
According to the New York Times, Walmart has made a proposal to buy 51 percent of the Indian company for between $10 and $12 billion, and despite the company going head to head with Amazon, sources (who wish to remain anonymous) believe a deal with Walmart is more likely.
The Flipkart board recently met to discuss the two offers and is allegedly leaning towards accepting Walmart’s deal because negotiations with Amazon could be a conflict of interest. Presently, Amazon and Flipkart are the two biggest players in India’s e-commerce market, which means any deal with Amazon could spark monopoly concerns.
The U.S company’s executives claim to have an ongoing interest and commitment to the Indian e-commerce market, with sources saying Flipkart’s founders, Sachin and Binny Basal, believe Walmart will be able to help drive the business forward.
If Walmart were successful in securing a deal with Flipkart, the retail giant would hold a major stake in what has been referred to as an emerging market that consists of more than 1.3 billion people.
However, it’s also rumoured that Amazon could still be in the running, as Flipkart’s largest shareholder, SoftBank Group Corp feel more comfortable with the e-commerce giant’s capabilities because of how well it has continued to navigate the booming online industry. Procuring a large share in Flipkart would also be a big win for Amazon, after it made little progress against Alibaba Group Holding Ltd in China.
Amazon has already committed more than $5 billion US dollars to improve its position in India, but according to estimates by Forrester, Flipkart still controls nearly 40 percent of the country’s online retail market, ahead of Amazon.
The sources have said that any deal between Amazon and Flipkart could result in regulatory hurdles, as the combined businesses would control approximately 70 percent of the country’s online shopping market.
Much like Amazon’s Jeff Bezos, Flipkart’s co-founders first entered the e-commerce market by selling books. Since diversifying its product range, Flipkart is now in direct competition with Amazon on almost all of its product categories.
So far, no deals have been finalised, as talks between Walmart, Flipkart and its investors are ongoing, sources say.