Walmart to Invest $16 Billion to Acquire a 77% Stake in India's Flipkart
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May 10, 2018
Walmart to Invest $16 Billion to Acquire a 77% Stake in India’s
Flipkart
1) On May 9, Walmart announced the signing of a definitive agreement to invest $16
billion for a 77% stake in Flipkart, a leading online retailer in India. The company said
it supports Flipkart’s ambition to become a publicly listed subsidiary in the future.
2) Walmart believes the acquisition will create significant long-term value for
shareholders through entering a critical growth market, acquiring a leader in e-
commerce, acquiring local talent with global expertise and achieving long-term
growth.
3) The investment includes $2 billion of new equity funding, supported by newly issued
debt and cash on hand. The company expects the investment to reduce FY19 EPS by
$0.25–$0.30 and FY20 EPS by $0.20, assuming a close in the second quarter of this
fiscal year.
Walmart to Invest $16 Billion for a 77% Stake in India‘s Flipkart
On May 9, Walmart announced the signing of a definitive agreement to invest $16 billion
for a 77% stake in Flipkart, a leading e-commerce player in India. The company said it
supported Flipkart’s ambition to become a publicly listed subsidiary in the future.
Walmart commented that India is one of the most attractive retail markets in the world,
due to its size and growth rate, and the investment is an opportunity to partner with the
company that is leading the transformation of e-commerce in India.
The investment includes $2 billion of new equity funding, supported by newly issued debt
and cash on hand. The company estimates the investment will reduce FY19 EPS by $0.25–
$0.30 and FY20 EPS by $0.20, assuming a close in the second quarter of this fiscal year.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 1
Copyright © 2018 Coresight Research. All rights reserved.
May 10, 2018
Rationale for the Transaction
The company began its presentation with its slogan, “We save people money so they can
live better.”
Key points from the discussion follow.
Flipkart Fits Within Walmart’s International Strategy
• The Flipkart investment represents a high-growth, attractive market opportunity
with the local leader.
• India is one of the key growth markets in which Walmart wants to practice active
portfolio management.
• Other points include Walmart’s pledge to create disciplined growth through a
differentiated customer proposition, to be the lowest-cost operator and to build
strong foundations.
Flipkart Transforms Walmart’s E-Commerce Opportunity in a Critical Growth Market
The India market:
• Is an attractive opportunity in one of the fastest-growing markets.
• E-commerce is growing four times as fast as the retail industry.
Flipkart:
• Is the local leader, with $7.5 billion of annual gross merchandise value (GMV), which
is the total value of goods sold through the sites, and 54 million active customers.
• Has an experienced and committed management team, with strong in-country
experience.
• Has strong shareholder partners and a successful track record of investments in Asia.
• Creates long-term value for shareholders, associates, communities and the Indian
economy.
India Is a Compelling Market with Long-Term Potential
• India’s GDP has grown at a 9.4% compound annual growth rate (CAGR) over the past
10 years.
• The country has 443 million millennials, plus 393 million Generation Zers, comprising
66% of the population.
• 35% of the population uses the Internet, making India the second-largest Internet
market globally.
• The mobile percentage of Internet traffic is 79%, versus 50% globally.
• Smartphone penetration is estimated to hit 58% in 2020, versus 30% in 2017.
India E-Commerce Is Projected to Grow Four Times as Fast as Total Retail Over the Next
Five Years
Total India retail is projected to grow at 9% over the next five years, compared to 36% for
e-commerce.
The following graph shows the expected acceleration in Indian e-commerce.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 2
Copyright © 2018 Coresight Research. All rights reserved.
May 10, 2018
Figure 1. India E-Commerce Penetration (Excluding Services)
7.0% 6.2%
6.0%
5.0%
4.0%
3.0% 2.1%
1.8% 1.8%
2.0%
1.0%
1.0% 0.2% 0.3% 0.4%
0.0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY23E
Source: Bain & Co.
Flipkart Is the Local Leader in India E-Commerce
The following graphic shows a screenshot of Flipkart’s app, outlines the flagship Flipkart
businesses and illustrates Flipkart’s ecosystem.
Source: Walmart
Flipkart Is Positioned for Significant Growth
The graph below shows Flipkart’s GMV and the number of active customers, and the
sidebar shows the number of units sold in FY18.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 3
Copyright © 2018 Coresight Research. All rights reserved.May 10, 2018
Gross Merchandise Value Active Customers (Mil.)
(USD Mil.)
Note 1: Gross Merchandise Value (GMV), as defined by Flipkart represents the total dollar value of orders
processed on its marketplaces in the period without reduction for returns.
Note 2: Active customers are customers transacting at least once in the last 12 months. Total does not exclude
customer overlap between entities.
Source: Walmart
Flipkart Maintains a Leading Position in Fast-Growing Categories
The following graphic ranks Flipkart’s position by GMV share.
Source: Wall Street analysts and Bain & Company estimates.
Walmart Is Working with Strong Shareholder Partners
Key strategic and shareholder partners include the following leading companies:
Source: Walmart
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 4
Copyright © 2018 Coresight Research. All rights reserved.May 10, 2018
Details from the Transaction
Transaction Structure
• Walmart’s investment of approximately $16 billion, including $2 billion of new
equity funding, which will help Flipkart achieve its growth potential.
• Walmart’s initial ownership stake is approximately 77%.
• The remaining shares will be held by Flipkart’s existing shareholders, including
Cofounder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft.
• Walmart supports Flipkart’s ambition to transition into a publicly listed, majority-
owned subsidiary in the future.
• The closing is expected later in FY19, subject to regulatory approval.
Financial Impact
• The investment will be funded by a combination of newly issued debt and cash on
hand.
• Flipkart will be reported as part of Walmart’s International segment.
• If the acquisition closes at the end of the fiscal second quarter, FY19 EPS will be
reduced by $0.25–$0.30 and FY20 EPS by $0.20.
• In the mid to long term, as the business scales and efficiencies are realized, Walmart
expects losses to decline and returns to improve.
• Walmart anticipates the continuation of its current share buyback program, while
maintaining its strong credit profile.
The Transaction Is Expected to Create Significant Long-Term Value for Shareholders
Walmart sees value in:
• Entering a critical growth market.
• Acquiring a leader in e-commerce.
• Acquiring local talent with global expertise.
• Achieving long-term growth.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 5
Copyright © 2018 Coresight Research. All rights reserved.May 10, 2018
Deborah Weinswig, CPA
CEO and Founder
Coresight Research
New York: 917.655.6790
Hong Kong: 852.6119.1779
China: 86.186.1420.3016
deborahweinswig@fung1937.com
John Harmon, CFA
Senior Analyst
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Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 6
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