IPO on the cards
Walmart has told Flipkart’s board that it intends to sell shares of the Indian ecommerce firm in an initial public offer (IPO) in three years time. “That has already been discussed as part of the deal talks,” said the first source.
The second source said that once Flipkart gets closer to profitability, an IPO would be very much on cards. “An IPO is important for a company to become transparent and accountable,” the second source added.
While CEO Krishnamurthy will continue to helm Flipkart, one among its two founders – Sachin Bansal, chairman, or Binny Bansal, group chief executive – may exit. Earlier, FactorDaily had reported that Binny Bansal will quit the company. “But, nothing is final,” one of the sources said.
Most of the remaining senior leadership will stay unchanged, confirmed two of the sources. “Walmart doesn’t want to run Flipkart… It will only look at build better governance and transparency,” said the first source.
The second source added that Flipkart is not the first Indian ecommerce company Walmart checked out. Others like Snapdeal and ShopClues were also probable targets, but Walmart wanted to go with the largest company, despite the size of the deal.
The reason: Flipkart has a large logistics network, is the largest ecommerce company and has stood up to US giant Amazon’s onslaught, and will play an important role in building a robust grocery marketplace.
Building the agri-supply chain
The single biggest reason for Walmart’s interest in Flipkart is its grocery business – something that Walmart has been trying to build for a decade. Indian laws don’t allow Walmart to open physical stores as the government has still not allowed foreign direct investments in multi-brand retail.
“Building the agri supply chain was the single largest driver in the deal… Walmart’s focus on foods isn’t changing be it physical retail or ecommerce,” said the first source. “One has to look at traceability and tracking in the food supply chain… Walmart is going big on farm to home.”
So much so that it plans to bring its China model of blockchain based-supply chain to India when it comes to food retail. “Walmart wants to use blockchain technology for traceability… It is important for food safety,” said the first source.
In China, Walmart has partnered JD.com (a company in which it has invested), IBM and Tsinghua University National Engineering Laboratory for E-Commerce Technologies in the Blockchain Food Safety Alliance. JD.com is China’s second largest ecommerce company after Alibaba.
Most of the investments here will go into food, the sources said. Almost 50% of the primary investment will go into building the food and grocery supply chain, they added.
“Walmart plans to build that in India, too… food and grocery will have huge upsides in India,” said the first source. “Whoever brings that will bring a lot of loyalty and consumerization.”