Flipkart to WalMart/Amazon

While the talk with Walmart to buy a controlling stake in Flipkart is advancing, in a new twist, Amazon is also showing its interest in acquiring Flipkart – the post boy of the Indian e-commerce revolution.

Flipkart, Founded in 2007 by ex-employees of Amazon, has grown leaps and bounds in the last 11 years. After the recent round of funding by SoftBank Flipkart’s valuation is hovering $14 billion. However, all is not good for Flipkart.

The declining valuation, a regular exit of top executives, increasing losses, and intensified competition by Amazon and Paytm are some of the major challenges for Flipkart. Last two years, it was a roller coaster ride for the Indian e-commerce major, which has so far raised $6 billion.

In FY 2017, while Flipkart’s recorded a 29% YoY increase in revenue, losses swell 66% to Rs 8,771 Crore.

The e-commerce major failing to retain its top talents and at regular intervals. In the last 2 years, many top management and senior executives who joined the company barely a few years ago parted their ways.

The losing market to its arch-rival Amazon is another big challenge for Flipkart, which is also started resulting in losing the confidence of its own investors. After Snapdeal debacle, which was almost sold for just $1 billion to Flipkart, questions started chasing Flipkart on its over-hyped valuation.

The situation under the leadership of Kalyan Krishnamurthy – the strategically placed CEO by the company’s investors – has started improving though, it’s going to be a bumpy ride for Murthy for a long time. However, for a company which was barely valued just $5.2 billion barely a year ago, it will be a massive turnaround if the new buyer finds it worth anything over $20 billion.

According to the sources by Mint, Amazon is gearing up to make a counter offer to Flipkart to strengthen its presence in India. The development is also being considered as an effort by Amazon to avoid Walmart to have a sizable chunk of the pie that would allow the latter one pursue the third largest internet market aggressively.

Walmart is reportedly in advance level of discussion with Flipkart to buy a controlling share of the company. Walmart is willing to buy anything between 40% and 55% share of Flipkart at the valuation of $21 billion.

Sources of Mint believe that chances of Flipkart going with Amazon are quite bleak unless the latter one keeps something on the table that stakeholders of Flipkart can’t refuse. Tiger Global, Accel Partners, Naspers and IDG Ventures are the main stakeholders in Flipkart, who are also expected to make an exit or sell a majority of their holding to the acquirer, If Amazon manages to entice them there is every possibility of Amazon acquiring Flipkart. However, in the current situation, odds are favouring Walmart.

It may be little too early to be conclusive about the ongoing tug of war between Amazon and Walmart, but one thing is certain – it will be Flipkart which may have the last laugh.

Source : dazeinfo.com

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06-04-2018 02:43 am