Walmart begins preparation for Flipkart’s $10bn IPO

By Rahul Vaimal, Associate Editor
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Retail giant Walmart has hired Goldman Sachs, the multinational investment bank and financial services company, to explore an initial share sale of its Flipkart unit in the US to raise around $10 billion, said sources.

The US-based Walmart is planning to sell around 25 percent in India’s largest online retailer. “Work on the IPO (initial public offering) is in full swing and the advent of the pandemic has only hastened the process, given the spectacular surge in demand on eCommerce platforms,” the sources said.

Rapid shift to eCommerce

After the coronavirus outbreak, online transactions in India have surged as people largely stayed indoors and avoided crowded markets and department stores.

Millions of new customers from small towns and cities have been pushed by the pandemic to switch to online platforms, boosting eCommerce companies’ valuations. Flipkart is competing with the Indian unit of Amazon and the Reliance Industries owned by Mr. Ambani, which is ramping up its JioMart eCommerce business to challenge its online space rivals.

Record-breaking IPO

If Flipkart’s IPO plans are successful, it will be the largest by a company based in India on overseas exchanges.

Flipkart’s valuation will also more than double to $40 billion since Walmart’s acquisition of the eCommerce giant. Reports in September suggested that Flipkart will go public in 2021. The US retailer had pledged to take Flipkart public in four years after it bought a 77 percent stake for $16 billion in 2018.

In July, in a fresh funding round with Walmart as the lead investor, Flipkart raised $1.2 billion, valuing the business at $24.9 billion. Walmart now owns an 82.3 percent stake in Flipkart, with US-based hedge fund Tiger Management, China’s Tencent, Accel Partners and Microsoft Corp., among the other key investors. The IPO will offer an opportunity to minority investors to sell or pare their holdings.

A Flipkart spokesperson said that, “An IPO has always been part of Flipkart’s long-term strategy. However, the focus at present is on growth and democratizing commerce in India through technology, while continuing to unlock customer value.”

Business expansion

The share sale proceeds are likely to be used to expand Flipkart’s business at a time the eCommerce market is booming. Flipkart’s payments unit PhonePe, which is looking to break even by 2022, is also planning to go public by 2023.

Flipkart had recently announced its decision to partially spin-off the unit. The digital payments company, which competes with Paytm, Google Pay and Amazon Pay, too, is likely to list on a US stock exchange at a valuation of $10 billion. PhonePe has also focused on foreign markets and could be looking to take its payment solutions business to the US through Walmart.

Flipkart has not only increased its customer base and supply chain over the past few months, but has also expanded its reach to new pin codes across India. To draw consumers who are not comfortable shopping using the English user interface, it has also incorporated multiple languages on its platform.

In July, all of Walmart’s India operations were merged into Flipkart as the parent consolidated its operations. Flipkart started in 2007 by mostly selling books, but later the company expanded into other segments such as consumer electronics, fashion, home essentials, groceries and apparel.