American retailer Walmart has expedited its plans to list Indian e-tailer Flipkart in the U.S.
The Bentonville, Arkansas-based retail behemoth is planning to sell around 25% stake in Flipkart in the initial share sale to raise around USD 10 billion, local media Mint said citing two sources familiar with the development. The company has hired Goldman Sachs to take the process forward, the report added.
This means the company plans to list Flipkart at a valuation of USD 40 billion, almost double the USD 21 billion valuation at which Walmart had acquired 77% stake of the homegrown retailer in 2018.
“Work on the IPO (initial public offering) is on in full swing and the advent of the pandemic has only hastened the process, given the spectacular surge in demand on e-commerce platforms,” said one of the two people cited above.
Walmart had first revealed its plans to take Flipkart to an initial public offering by 2022 just after buying out the online marketplace for USD 16 billion.
Earlier in July, Flipkart had raised USD 1.2 billion-round led by its US-based parent at a valuation of USD 24.9 billion. Currently, Walmart owns an 82.3% stake in Flipkart, while other key investors include US-based hedge fund Tiger Global Management, Tencent, Accel Partners and Microsoft Corp., among other key investors.
As technology adoption rose among millions of Indians as they switched to online platforms to buy daily essentials and other necessities due to the pandemic, e-commerce platforms have been seeing a spike in user traction as well as demand. Flipkart has been locking horns with Amazon India and Reliance-owned JioMart in the world’s second-most-populous country to get a bigger pie of the e-commerce market that is expected to reach USD 94 billion by 2023.
Flipkart started in 2007 as a platform for selling books and expanded to other verticals like electronics, fashion, apparels, home essentials, and groceries in subsequent years. In October 2011, the company created a new entity in Singapore called Flipkart Pvt. Ltd, which now owns eight Indian entities including Flipkart Internet Pvt. Ltd, the company that runs the e-commerce marketplace Flipkart.com; Flipkart India Pvt. Ltd, the wholesale business; and Flipkart Logistics Pvt. Ltd, which runs eKart.
Since Walmart will be listing this Singapore-based entity in the US market and not the India entity, it would not need to abide by restrictions that India has on listing on foreign exchanges.
Walmart and Flipkart have been streamlining their business operations in wholesale this year. In July, Flipkart acquired 100% stake in its American parent’s local wholesale arm Walmart India and announced the launch of a new digital marketplace called Flipkart Wholesale to service neighborhood stores as well as small businesses.
“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,” a Flipkart spokesperson told Mint.
Parallelly, Flipkart’s payments unit PhonePe, which the e-tailer said it is partially hiving off, is also planning to go public in 2023 at a valuation of USD 10 billion. For now, the payment arm is raising USD 700 million led by its parent Walmart at a post-money valuation of USD 5.5 billion.
PhonePe, which is looking to break even by 2022, claims to have 250 million users at present and expects this number to reach 275 million by the year-end. PhonePe has also set sights on international markets and may look to taking its payment solutions business to the U.S. through Walmart.