“The (Flipkart) business is performing almost exactly like we thought it would. An IPO is still very much on the cards for that business. Just like everything else; it’s the timing. Is the business exactly where you want? Is the market right? All those things have to figure into what you do with an IPO,” Biggs said at the Morgan Stanley Global Consumer & Retail Conference last week. “IPO and letting our associates have a piece of the business, having it to be a more local business in India – all those things are important to us, longer term. And nothing about that has changed.”
Flipkart, founded in 2007, was acquired by Walmart over three years ago. It has been weighing an IPO in the US the past few quarters. The company offers more than 150 million products in 80 categories and has a registered customer base of 300 million, with an estimated gross merchandise value at $12 billion in FY20.
The Indian e-commerce market is the largest opportunity in the local internet ecosystem. It is expected to reach $133 billion by 2025 from $24 billion in 2018, a 30% CAGR. Flipkart has leadership in categories such as apparel and is two times bigger than the nearest competition. Amazon, however, leads in mobiles and consumer electronics while Reliance has used its offline footprint to build early leadership by order volumes in the e-grocery category.
“Flipkart was expected to list in the US in Q4CY21, with a special purpose acquisition company (SPAC) as one of the listing options. The proposed Softbank funding could likely delay the IPO plans for Flipkart. The fund raise is expected to expand investments in a fast-growing India ecommerce market with deep-pocketed competitors – Amazon and JioMart, owned by Reliance,” according to a Bernstein report in June.
However, in July, the Bengaluru-based ecommerce major raised $3.6 billion from investors including Canada Pension Plan Investment Board, Singapore’s sovereign wealth fund GIC and Japan’s SoftBank Vision Fund II, along with its largest shareholder Walmart on a valuation of $37.6 billion. The funding was Flipkart’s first capital infusion from external investors since Walmart acquired it in 2018, valuing the e-commerce firm at $22 billion then. Last year, Flipkart raised another $1.2 billion in an internal round led by Walmart on a total valuation of $24.9 billion.
“Flipkart may not list even in the next 12-18 months as their numbers are weak and may not appeal to Wall Street. While it was a two-player fight between Flipkart and Amazon earlier, the entry of Reliance with initial traction in grocery has changed the dynamics significantly,” said a senior official familiar with Flipkart’s plans.
In its earnings call last month, Walmart said Flipkart had another good quarter with strong sales growth and favorable trends in monthly active customers and users. In anticipation of the holiday season, the company doubled fulfillment capacity versus last year with dozens of new fulfillment centers and more than a thousand last-mile delivery hubs. It also expanded relationships with kirana partners to handle a large percentage of last-mile deliveries.
“Growth is good. It’s certainly on the path to profitability. We expect that or we wouldn’t have gotten into the business. We are going to continue to invest and take opportunities to grow that business, not just in retail but other areas too. PhonePe is a part of that,” Biggs added.