Walmart May Exit Flipkart After Listing On US Stock Market Next year: What Is Happening Here?

According to the board of the Walmart-owned e-commerce giant, Flipkart will be tapping the US equity market by 2020. The Flipkart board meeting was scheduled earlier this month in Bentonville, Arkansas alongside Walmart’s annual shareholder conference.

The Flipkart group CEO Kalyan Krishnamurthy has formally notified his top officers about the Initial Public Offering (IPO) timeline.

Krishnamurthy in discussion with his core team comprising of senior Vice Presidents has put emphasis on the need to tighten compliance and map profitability over the next two years as it will help to go public.

Walmart To Exit The Indian Company?

This step comes at a time when Walmart may be planning to use the Initial Public Offering (IPO) to partially or fully exit from the Indian company in which it holds a 77% stake, a person familiar with the step stated.

The focus on profitability is also well timed as Walmart was facing a decline in its gross profit rate and operating income for its international business in the quarter of Feburary – April, a major reason being the Flipkart’s inclusion in the financial performance.

Also, aside of the policy changes that hit e-commerce players with the implementation of the new foregin direct  Investments (FDI) regulations which have made the business profitable in a largely discount led industry is another challenge for Walmart.

Increased Liquidity For Investors

The 12-year-old, Bengaluru based company which is considered as the flag bearer of the Indian Consumer internet story, going public will ensure further liquidity for investors including Walmart, Tencent, Tiger Global, as well as employees.

It has also been reported that Flipkart has disbursed Employee Stock Ownership Plans ( ESOPs) worth more than $100 million to senior and middle-level staff in order to retain the key talent a year into  Walmart’s purchase of a majority stake in the Indian firm.

According to a Flipkart spokesperson, IPO has always been a part of Flipkart’s ambition and long term strategy. When it got acquired by the American retailer last year, it has mentioned the possibilty of an IPO in over the next four years.

But on recent visits by Walmart CEO Dough McMillon and Judith McKenna, there was suprisingly no mention of an IPO timeline.

Compliance And Profitability

Flipkart has hired KPMG to conduct due diligence of vendors as a part of the parent company Walmart’s Global Anti-bribery Compliance Programme which has now been extended to the e-commerce giant.

According to the US Securities and Exchange Commission, Walmart has agreed to pay about $282 million to settle the bribery prices faced by subsidiaries in Mexico, Brazil, China, and India –  the final related to a case from seven years ago.