Bengaluru: Months after Walmart forked out $16 billion to buy 77% of Flipkart, the Indian e-commerce firm’s group chief executive Binny Bansal said the world’s largest retailer had made a bargain buy. In an interview with San Francisco-based news website Recode on Tuesday, Bansal refuted a claim made earlier that Walmart overpaid for Flipkart and insisted that the US-based retail giant had, in fact, made a long-term bet on India that would pay off over the next five to ten years.
“Absolutely," Bansal said, when asked if Walmart had underpaid for Flipkart. “That’ll be very clear 5-10 years down the line."
In August, Walmart closed its $16-billion buyout of Flipkart, days after receiving the green light from India’s antitrust watchdog, the Competition Commission of India (CCI).
Prior to Walmart’s buyout, which valued the Flipkart Group at $21 billion, Flipkart was valued at about $12 billion in a 2017 funding from SoftBank Group Corp., Tencent Holdings Ltd, Microsoft Corp. and eBay Inc.
According to Bansal, Flipkart was Walmart’s only viable acquisition target in India. “It all came about pretty well for both sides eventually... For Walmart, it made sense to partner with Flipkart. Flipkart was the only option (for Walmart) to make a play in India. The future of retail, especially in a country like India, is e-commerce. And the way to make a play in e-commerce was either to build it or to work with Flipkart," Bansal said. Bansal also indicated that Flipkart would continue to push aggressively for an IPO over the next few years, despite the Walmart buyout.
“From an IPO perspective, from an independent brand perspective, we still have the goal of taking the company to an IPO in the future with Walmart being a majority investor," Bansal said. “We believe that we can be way more competitive with the right partners around us. The other partners that we have are Tencent, we also have Microsoft as an investor."
Despite Bansal’s latest claim on a potential Flipkart IPO, a number of experts tracking India’s e-commerce sector have said that a listing of Flipkart is unlikely any time in the next few years, given that the company will need to keep spending lots of cash to keep its leadership position amid the battle with Amazon India.
Mint reported on May 14 that a Flipkart IPO is unlikely to happen for many years to come, as Walmart will have to invest heavily to make its $16-billion acquisition work. Walmart, in fact, has told Flipkart’s leadership team to not worry about an IPO anytime soon, since it is viewing Flipkart as a long-term bet that may take years, or even decades, to yield excellent financial returns, Mint reported.
Bansal, who over the past few years has repeatedly claimed that Flipkart is larger than Amazon in India, also said that it was not impossible to compete against and beat Amazon. Since Amazon entered India in June 2013, it has grown rapidly and grabbed market share from the Indian e-commerce firm. In fact, at one point in 2016, Amazon had briefly overtaken Flipkart in terms of gross monthly sales, before Flipkart reclaimed its lead.