Alphabet is likely to invest $1-2 billion after the Walmart acquisition.
As the Flipkart-Walmart deal nears a close where Walmart will be picking up a majority stake in Flipkart, it is now learnt is Alphabet, Google’s parent company, will also step in and take a position in the company along with Walmart, reports Economic Times. Alphabet could end up holding a minority stake in Flipkart with Walmart ultimately inching up through different stages to hold almost 95% leaving a small minority stake to Alphabet.
Though none of the players involved, Walmart, Google or Flipkart, have officially commented on the development, talks seem to have progressed along these lines and even more details have emerged of the way Walmart will go about completing the acquisition.
Walmart’s acquisition of Flipkart will witness different levels of buyouts of stakes; Japan’s SoftBank that holds around 21% might exit totally selling its holding to Walmart. Chinese investor Tencent and Tiger Global Management from the US may sell part of their stakes. Their total holding comes to around 16.5%. There are also some early investors in the ecommerce firm like Accel Partners, Naspers of South Africa and the ecommerce platform owner eBay.
And then the two promoters, Sachin Bansal and Binny Bansal. Sources indicate the decision on their holding being sold to Walmart is yet to be arrived at. The initial agreement may allow Walmart to keep picking up the different stakes in stages, with the right to make the offer first. This will apply to those investors who may not wish to make an exit now.
There is also perhaps a proposal to list the company so that it may facilitate arriving at the right valuation/share price for the stakeholders. These reports also say that Flipkart’s CEO Kalyan Krishnamoorthy may be asked by Walmart to stay on even after they take over.
Another bit of information emerging out of these efforts by Walmart to make its presence felt in the Indian market is that the American giant will give a lot of focus to the farm sector in India and expand the food and grocery category in the online store already started by Flipkart. This may be propelled by some of the impressive predictions being made about the potential of the Indian market. These include a quantum jump in total consumption from $1.3 trillion in 2016 to $3.6 trillion by 2027.
Observers see Walmart making heavy investments in the backend supply chain management and also creating huge job opportunities throughout the country.
Walmart’s biggest rival as is Flipkart’s now will be Amazon and it already has the experience being involved in a similar rivalry in the US market. The total investment that Walmart has to make in this Indian acquisition is not clear as yet. However, the initial figures floated hover around the $2 billion to $2.5 billion mark.
Google has its own plans for the Indian market and this investment in Flipkart along with Walmart will see the company exploring the synergies where their products can be pushed to customers and where Google’s customers can gain in their online procurements on the Walmart owned Flipkart in the days to come.