Significant opportunity to partner with local leader in a large,
fast-growing market
Flipkart’s strong leadership team will be supported by Walmart,
Tencent, Tiger Global and Microsoft
Underscores long-term commitment to India, where company looks to
serve customers, support job creation, small businesses, farmers and
women entrepreneurs
Walmart supports Flipkart’s ambition to transition into a
publicly-listed, majority-owned subsidiary in the future
Walmart to host investor conference call at 7:00 a.m. CDT/5:30 p.m.
IST
BENTONVILLE, Ark. & BENGALURU, India -- (Business Wire)
Walmart Inc. (NYSE: WMT) announced it has signed definitive agreements
to become the largest shareholder in Flipkart Group (“Flipkart”). The
investment will help accelerate Flipkart's customer-focused mission to
transform commerce in India through technology and underscores Walmart’s
commitment to sustained job creation and investment in India, one of the
largest and fastest-growing economies in the world.
Subject to regulatory approval in India, Walmart will pay approximately
$16 billion for an initial stake of approximately 77 percent in
Flipkart, formally Flipkart Private Limited. The remainder of the
business will be held by some of Flipkart’s existing shareholders,
including Flipkart co-founder Binny Bansal, Tencent Holdings Limited,
Tiger Global Management LLC and Microsoft Corp. While the immediate
focus will be on serving customers and growing the business, Walmart
supports Flipkart’s ambition to transition into a publicly-listed,
majority-owned subsidiary in the future.
“India is one of the most attractive retail markets in the world, given
its size and growth rate, and our investment is an opportunity to
partner with the company that is leading transformation of eCommerce in
the market,” said Doug McMillon, Walmart’s president and chief executive
officer. “As a company, we are transforming globally to meet and exceed
the needs of customers and we look forward to working with Flipkart to
grow in this critical market. We are also excited to be doing this with
Tencent, Tiger Global and Microsoft, which will be key strategic and
technology partners. We are confident this group will provide Flipkart
with enhanced strategic and competitive advantage. Our investment will
benefit India providing quality, affordable goods for customers, while
creating new skilled jobs and fresh opportunities for small suppliers,
farmers and women entrepreneurs.”
“This investment is of immense importance for India and will help fuel
our ambition to deepen our connection with buyers and sellers and to
create the next wave of retail in India,” said Binny Bansal, Flipkart’s
co-founder and group chief executive officer. “While eCommerce is still
a relatively small part of retail in India, we see great potential to
grow. Walmart is the ideal partner for the next phase of our journey,
and we look forward to working together in the years ahead to bring our
strengths and learnings in retail and eCommerce to the fore.”
Founded in 2007, Flipkart has led India’s eCommerce revolution. The
company has grown rapidly and earned customer trust, leveraging a
powerful technology foundation, including artificial intelligence, and
emerging as a leader in electronics, large appliances, mobile and
fashion and apparel. In a market where Walmart expects eCommerce to grow
at four times the rate of overall retail, and with well-known platforms
such as Myntra, Jabong and PhonePe, Flipkart is uniquely positioned to
leverage its integrated ecosystem, which is defined by localized
service, deep insights into Indian customers and a best-in-class supply
chain. Flipkart’s supply chain arm, eKart, serves more than 800 cities,
making 500,000 deliveries daily. In the fiscal year ended March 31,
Flipkart recorded GMV of $7.5 billion1 and net sales of $4.6
billion representing more than 50 percent year-over-year growth in both
cases. With the investment, Flipkart will leverage Walmart’s
omni-channel retail expertise, grocery and general merchandise
supply-chain knowledge and financial strength, while Flipkart’s talent,
technology, customer insights and agile and innovative culture will
benefit Walmart in India and across the globe.
While Walmart and Flipkart will leverage the combined strengths of both
companies, they will maintain distinct brands and operating structures.
Currently, Walmart India operates 21 Best Price cash-and-carry stores
and one fulfillment center in 19 cities across nine states in India,
with more than 95 percent of sourcing coming from India, aiding
suppliers, creating skilled jobs and contributing to local economies
across the country. Krish Iyer, president and chief executive officer of
Walmart India, will continue to lead that part of the business.
“Flipkart has established itself as a prominent player with a strong,
entrepreneurial leadership team that is a good cultural fit with
Walmart,” said Judith McKenna, president and chief executive officer of
Walmart International. “This investment aligns with our strategy and our
goal is to contribute to India’s success story, as we grow our business.
Over the last 10 years, Flipkart has become a market leader by focusing
on customer service, technology, supply chain and a broad assortment of
products. With Flipkart and the other shareholders who have come
together, we will continue to advance the winning eCommerce ecosystem in
India.”
With retail changing rapidly, Walmart is actively looking for new ways
to serve customers and moving with speed. The Flipkart investment
represents a unique opportunity, consistent with the approach of looking
for innovative ways to grow domestically and internationally,
particularly in markets with significant long-term opportunity. The
Flipkart investment transforms Walmart’s position in a country with more
than 1.3 billion people, strong GDP growth, a growing middle class and
significant runway for smartphone, internet and eCommerce penetration.
Structure, Financial Implications and Other Details
Walmart’s investment includes $2 billion of new equity funding, which
will help Flipkart accelerate growth in the future. Walmart and Flipkart
are also in discussions with additional potential investors who may join
the round, which could result in Walmart’s investment stake moving lower
after the transaction is complete. Even so, the company would retain
clear majority ownership. Tencent and Tiger Global will continue on the
Flipkart board, joined by new members from Walmart. The final make-up of
the board has yet to be determined, but it will also include independent
members. The board will work to maintain Flipkart’s core values and
entrepreneurial spirit, while ensuring it has strategic and competitive
advantages.
Closing is expected later this calendar year, subject to regulatory
approval.
To finance the investment, Walmart intends to use a combination of newly
issued debt and cash on hand. Upon closing, Flipkart’s financials will
be reported as part of Walmart’s International business segment. If the
transaction were to close at the end of the second quarter of this
fiscal year, Walmart expects a negative impact to FY19 EPS of
approximately $0.25 to $0.30, which includes incremental interest
expense related to the investment.
In FY20, as we look to accelerate growth in this important market,
Walmart anticipates an EPS headwind in total of around $0.60 per share,
comprised of:
-
Operating losses of approximately $0.40 to $0.45 per share, assuming
minimal tax benefit for losses in the near to mid-term. This amount
includes about $0.05 per share related to amortization of intangible
assets and depreciation of short lived assets resulting from purchase
accounting, which will only last for a few years post-closing.
-
Interest expense of approximately $0.15 per share.
Given the company’s financial strength, we anticipate the continuation
of our current share buyback program while maintaining our strong credit
profile.
This investment represents a unique opportunity in a market with
significant long-term growth prospects. Walmart is investing in a local
leader with strong leadership and a culture of innovation and service,
and the company is aligned with a strategic and committed shareholder
group focused on serving customers. In the mid to long term, as the
business scales and efficiencies are realized, Walmart expects losses to
decline and returns to improve.
Partnering to Contribute to India
As Walmart scales in India, the company will continue to partner to
create sustained economic growth across agriculture, food and retail.
Future investments will support national initiatives and will bring
sustainable benefits to the country, including:
- Job creation, as plans would create jobs through development of
supply chains, commercial opportunity and direct employment.
- Supporting small business and ‘Make in India,’ through direct
procurement as well as increased opportunities for exports through
global sourcing and eCommerce. Among other initiatives, Walmart will
partner with kirana owners and members to help modernize their retail
practices and adopt digital payment technologies.
- Support farmers and develop supply chains through local
sourcing and improved market access.
- Reduced food waste by improving waste management practices and
investing in supply chains, especially cold storage.
Investment Community Call
Walmart will host a conference call for analysts and investors at 7:00
a.m. CDT and 5:30 p.m. IST.Along with this press release, an
accompanying presentation can be accessed here.
The conference call will be webcast live and accessible by following
this link.
The webcast will be archived and available beginning at approximately
noon CDT on May 9.
For multi-media assets, please visit https://corporate.walmart.com/newsroom.
Advisers
J.P. Morgan Securities LLC is acting as the lead financial advisor for
Walmart, along with Barclays, with Hogan Lovells, Shardul Amarchand
Mangaldas & Co. and Gibson, Dunn & Crutcher LLP as outside counsel to
Walmart. Goldman Sachs & Co. LLC acted as exclusive financial advisor to
Flipkart. Gunderson Dettmer LLP, Khaitan & Co., Allen & Gledhill LLP and
Dentons Rodyk & Davidson LLP provided legal counsel to Flipkart.
About Walmart
Walmart Inc. (NYSE: WMT) helps people around the world save money and
live better - anytime and anywhere - in retail stores, online, and
through their mobile devices. Each week, nearly 270 million customers
and members visit our more than 11,700 stores under 65 banners in 28
countries and eCommerce websites. With fiscal year 2018 revenue of
$500.3 billion, Walmart employs approximately 2.3 million associates
worldwide. Walmart continues to be a leader in sustainability, corporate
philanthropy and employment opportunity. Additional information about
Walmart can be found by visiting http://corporate.walmart.com,
on Facebook at http://facebook.com/walmart and
on Twitter at http://twitter.com/walmart.
About Flipkart
The Flipkart Group is one of India’s largest e-commerce marketplace and
includes group companies Flipkart, Myntra, Jabong, and PhonePe.
Launched in 2007, Flipkart has enabled millions of customers, sellers,
merchants, and small businesses to be a part of India's e-commerce
revolution, offering over 80 million products across 80+ categories.
Flipkart is known for pioneering industry-first innovations such as Cash
on Delivery, No Cost EMI and easy returns – customer-centric services
that have made online shopping more accessible and affordable for
millions of customers. Together with Myntra and Jabong, which hold
prominent positions in the online fashion market, and PhonePe, India’s
first UPI based payment app with offerings in nine languages, the
Flipkart Group has steered the transformation of commerce in India.
Forward Looking Statements
This release contains statements as to Walmart management's guidance
regarding the earnings per share impact of Walmart’s investment in
Flipkart for the fiscal year ending January 31, 2019, and the subsequent
fiscal year and as to the future operations of Flipkart, as well as
statements by Walmart about its share buyback program and its credit
profile. Walmart believes such statements are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, as amended, that are intended to enjoy the
protection of the safe harbor for forward-looking statements created
thereunder. Assumptions on which such forward-looking statements are
based are also forward-looking statements. Walmart's actual results may
differ materially from the guidance provided as a result of changes in
circumstances, assumptions not being realized or other risks,
uncertainties and other factors, including: the closing date for
Walmart’s investment in Flipkart; the level of Walmart’s investment in
Flipkart from time to time; currency exchange rate fluctuations; changes
in market interest rates; competitive pressures and other economic,
geo-political, capital markets and business conditions, trends and
events in India; changes in existing rules and regulations regarding
foreign direct investment in the retail business in India; other changes
in existing tax, labor or other law or regulations in India; and other
risks, uncertainties and factors relating to Walmart’s operations and
financial performance discussed in its filings with the SEC. You should
read this release in conjunction with our Annual Report on Form 10-K for
the year ended January 31, 2018, and our subsequently filed Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. You should
consider all of the risks, uncertainties and other factors identified
above and in those SEC reports carefully when evaluating the
forward-looking statements in this release. Walmart cannot assure you
that the future results reflected in or implied by any such
forward-looking statement will be realized or, even if substantially
realized, will have the forecasted or expected consequences and effects
for or on our operations or financial performance. Such forward-looking
statements are made as of the date of this release, and Walmart
undertakes no obligation to update such statements to reflect subsequent
events or circumstances.
1 Gross Merchandise Value or GMV, as Flipkart defines it,
represents the total dollar value of orders processed on its
marketplaces in the period without reduction for returns.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180509005590/en/
Contacts:
Media Contact Information
Walmart Media Relations
U.S.:
1-800-331-0085
India: indiaqueries@walmart.com
news.walmart.com/reporter
or
Flipkart
Media Relations
India: +91 9821176371
media@flipkart.com
or
Walmart
Investor Relations
Kary Brunner, +1-479-277-8782
Source: Walmart Inc.
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