Flipkart buys back shares worth $350 million
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Flipkart, India’s largest homegrown online retailer, has bought back shares worth $350.5 million from its investors, a move that is seen as a precursor to the entry of a new investor. U.S. retail giant Walmart is close to acquiring a majority stake in Flipkart, at a valuation estimated between $18 billion and $20 billion, Reuters and Bloomberg reported on Friday.
Flipkart, on April 27, bought back shares from investors including venture capital firm Accel (India) partner Shekhar Kirani, Nishar Family Trust, IDG India Ventures Fund II, Ishir Goyal Gupta Irrevocable Trust, Sony Master Trust, and several other pension and mutual funds, according to a document filed with Singapore’s Accounting and Corporate Regulatory Authority (ACRA), which Fortune India has evaluated.
The transfer of shares enables Flipkart to meet the requirement for the maximum number of members as it seeks to be converted from a public limited company to private limited company—and change the name to Flipkart Pte Ltd from Flipkart Ltd. Stakeholders in a private limited company enjoy more flexibility than in a public company.
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Bloomberg, citing unnamed sources, reported that the Flipkart’s board has approved the sale of nearly 75% stake of the company to Walmart for nearly $15 billion. The report said Google’s parent company, Alphabet, is likely to participate in the investment with Walmart. A Flipkart spokesperson did not comment when contacted by Fortune India.
Flipkart, started in 2007 in a one-bedroom property in Bengaluru by former Amazon employees Sachin Bansal and Binny Bansal, is the most valued consumer Internet firm in India. It has raised nearly $6 billion from marquee investors such as Accel Partners, Tiger Global, Naspers, Morgan Stanley, and SoftBank, among others.
By acquiring a majority stake in Flipkart, Walmart will get a leadership position in India’s fast-growing online retail space. Rising disposable income, faster Internet adoption, and a young population—nearly half of India’s 1.32 billion people are under the age of 25—makes India a highly attractive market. Walmart's presence in India is so far limited to wholesale retail.
Walmart, the world’s largest company in revenue, known for its department stores, has increasingly focussed on online retail, with acquisitions such as Jet.com, as it faces severe competition from e-commerce giant Amazon.
The Flipkart acquisition, if concluded, will be Walmart’s largest yet in the field, and will put it squarely against Amazon in India. India’s online fashion market is projected to grow 3.5 times from $4 billion to $14 billion by 2020, whereas the broader online retail business is expected to grow to $200 billion in a decade.