US retailer Walmart pays $3.5 billion to increase stake in Flipkart

Parent Walmart paid $3.5 billion to acquire shares in Flipkart from non-controlling stakeholders, including co-founder Binny Bansal, and settle some liabilities with some PhonePe shareholders, the US retailer said in a Securities and Exchange Commission (SEC) filing.

As reported in July, Tiger Global, Flipkart co-founder Binny Bansal, and Accel had all fully exited the e-commerce firm by selling their stake to Walmart. The move by Walmart is part of its strategy to prepare Flipkart for an initial public offering (IPO), according to the sources.

“During the six months ended 31 July 2023, the company paid $3.5 billion to acquire shares from certain Flipkart non-controlling interest holders and settle the liability to former non-controlling interest holders of PhonePe,” said Walmart in its latest filing. “Additionally, during the six months ended 31 July 2023, the company received $0.7 billion related to new rounds of equity funding for the company’s majority-owned PhonePe subsidiary.”

Walmart had paid $1.4 billion to buy out US-based Tiger Global’s investment in firm Flipkart, according to sources. They said the transaction had put Flipkart’s valuation at $35 billion, against nearly $38 billion in 2021 when it raised $3.6 billion from Japan’s SoftBank, Walmart, and other investors. However, Flipkart achieved the new valuation of $35 billion without the support of PhonePe, which was part of the e-commerce company when it raised funding in 2021, according to the sources.

Accel initially held more than 20 per cent in Flipkart when it backed the company in 2008, according to data analytics firm Tracxn. It later reduced its stake to about 6 per cent before Walmart acquired a majority share in Flipkart in 2018.

In 2018, when Walmart invested $16 billion in Flipkart for the majority stake, the Bengaluru-based firm was valued at less than $21 billion. However, Accel retained a 1.1 per cent stake and has now fully exited the company. This generated cumulative returns of about $1.5 billion-$2 billion or 25-30x returns on its total investment, according to the sources. Similarly, Tiger Global has made cumulative gains of approximately $3.5 billion on its investments in the company. Walmart’s ownership in Flipkart now stands at about 80 per cent.

Though Flipkart co-founder Sachin Bansal had sold his entire stake to Walmart in 2018, Binny Bansal continued to hold a small stake (1-1.8 per cent) in the e-commerce firm. Binny Bansal has now also divested the remaining stake and has made a total of about $1-1.5 billion since inception to exit, according to the sources. He will remain on the company’s board. He is also an investor in PhonePe and sits on its board. He is reportedly also planning to launch another venture that would cater to the e-commerce industry.

Walmart has invested over $20 billion in Flipkart and PhonePe to capture a significant share of India’s e-commerce and fintech markets. Flipkart competes with players such as Amazon, Reliance’s JioMart and Tata-owned BigBasket. The e-commerce space is forecast to grow to $350 billion by 2030.

In December 2022, Flipkart and PhonePe announced the full ownership separation of the digital payments platform, setting the two businesses to chart their own paths and unlocking enterprise value for shareholders. Walmart-owned PhonePe recently achieved a pre-money valuation of $12 billion as part of an ongoing fundraising of up to $1 billion following its domicile shift to India last year.

During an investor conference in June this year, Walmart’s Chief Financial Officer John David Rainey said that the Flipkart marketplace and PhonePe payments business in India could be $100 billion businesses buoyed by strong growth.