As Walmart-Flipkart deal nears completion, investors eye Amazon for feelers

As Walmart closes in on finalising the term sheet to invest in Flipkart at a valuation of $20 billion, investors are prowling for feelers from rival Amazon to make a counter bid to buy the Indian e-commerce giant as they seek a higher valuation.

While a $20 billion is significantly higher than Flipkart’s valuation in the previous round, the valuation of the company on the secondary market will be lower. Softbank, which pumped in $2.5 billion into Flipkart just last August is looking to maximise its returns, said several sources close to the developments.

Softbank had earlier opposed Walmart from taking controlling stake in Flipkart, but as talks progressed the Japanese investor is said to have agreed to allow Walmart to become the largest stakeholder. Signaling a retreat, Softbank even led a Rs 30-billion investment in Flipkart's rival Paytm Mall earlier this week.

Other investors such as Tiger Global, Accel Partners, Naspers and IDG Ventures are expected to sell all or most of their shares in Flipkart through this deal.

A spokesperson for the Softbank could not be reached for comment until the writing of this story, while Flipkart and Amazon declined to comment.

One of the persons who Business Standard spoke to said that while the term sheet is close to getting finalised, until it is signed the chances of other parties offering counterbids remains open. He added that the signing could happen as soon as next week, after which the two firms will begin seeking regulatory approvals, etc, which could take a few months.

Apart from Walmart, both Amazon and Google had engaged in talks to invest in Flipkart but nothing had moved forward due to disagreements over the Indian company’s valuation. A Livemint report on Wednesday said that Amazon may submit a rival offer to buy Flipkart and that exploratory talks were held between the two companies.

Walmarts is looking at its investment in Flipkart as a way to get a foothold in the vastly untapped Indian retail market while also taking on its arch nemesis Amazon. The US retailers earlier attempt to partner with Bharati to enter India failed and while it currently runs 21 cash-and-carry wholesale stores in the country under the Best Price Modern Wholesale brand, it remains a fringe player.

One of the biggest possibilities that could emerge out of Walmart investing in Flipkart is the ability to open offline retail stores in India. The investment which is being seen as strategically important for Walmart in Asia, will give the company not just a leg up over Amazon in online retail, but also the offline market which continues to make up over 95 per cent of retail in India.

For Flipkart, the deal will not only give it access to massive capital to take on Amazon, but will also open the door for exclusive deals with global brands and will give it access to Walmart’s world-class sourcing. Experts have said that a Flipkart-Walmart marriage is the best scenario as it will allow the US retailer to take on both Amazon and Alibaba in India.