In a move that further solidifies its position in the Indian e-commerce market, retail giant Walmart has paid $1.4 billion to acquire Tiger Global’s remaining holding of Flipkart shares. The transaction, which took place in recent days, signals Walmart’s continued confidence in the growth potential of the Indian startup.
Tiger Global’s Investment Gains
Tiger Global, a New York-headquartered hedge fund, revealed that it made an impressive gain of $3.5 billion on its initial investment of $1.2 billion in Flipkart. The fund had previously cashed most of its Flipkart shares, making this final sale a lucrative endeavor for the investment giant. Flipkart is the only Indian startup in which Tiger Global had invested more than $1 billion, and the hedge fund’s early backing played a pivotal role in supercharging India’s startup community and putting the nation’s ecosystem on the world map.
The transaction valued Flipkart at an impressive $35 billion, down from its previous valuation of $37.6 billion following the split of payments startup PhonePe. Walmart had acquired a 77% stake in Flipkart for $16 billion back in 2018 and currently holds a 72% share in the company, according to market intelligence firm Tracxn. Prior to the buyout, Tiger Global held a 4% stake in Flipkart.
What Do The Critics Say?
Despite the substantial investments made by Walmart, some critics argue that the American giant has essentially invested over $20 billion in a company that competes with Amazon’s local division. Amazon managed to establish a similar business in-house for a significantly lower cost of around $7 billion.
In response to these sentiments, a spokesperson for Walmart reaffirmed the company’s faith in Flipkart’s future and expressed enthusiasm about the opportunities presented in the Indian market. With India’s growing middle class and increasing internet penetration, e-commerce companies like Flipkart continue to experience considerable demand.
Flipkart’s Challenges
Flipkart has largely depleted the capital it raised in 2021 and now faces the need for another round of funding. Despite gauging market interest in recent months, Flipkart has been unable to secure a deal due to a lower valuation. As a result, it is likely that the company will turn to Walmart once again to secure the majority of the financing needed for its next round.
For now, Walmart’s additional investment in Flipkart demonstrates the retail giant’s commitment to the Indian market and its ambition to compete with Amazon in one of the world’s most promising e-commerce battlegrounds. As the funding faucet remains open for Flipkart, the company is poised to continue its expansion and innovation in the ever-evolving Indian e-commerce landscape.
