Flipkart’s business ‘discipline’ impresses Walmart again despite expecting losses similar to last year

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Updated: March 08, 2020 1:47 PM

Walmart in a US SEC filing on May 9, 2018, had indicated the Flipkart IPO "following the fourth anniversary of closing of the Transactions."

Walmart acquired Flipkart Group including Myntra, Jabong, and PhonePe for around $16 billion in 2018.

Despite Rs 17,231 crore (consolidated) losses recorded by Flipkart for FY19, which may remain largely unchanged for the current financial year, doesn’t bother its parent company Walmart much as the former has been performing well, according to the US retailer. Impressed with Flipkart’s ‘discipline’ in business, Walmart’s CFO Brett Biggs speaking at the UBS Global Consumer & Retail Conference held earlier this week said “If you think about the guidance we gave on Flipkart, that losses will be pretty similar to what we had last year, but we’re still growing at a good rate. And so that’s really discipline to be able to do that.” The transcript of Biggs’ session at the conference was available on seekingalpha.com.

In May 2018, Walmart had announced the acquisition of Flipkart Group including Myntra, Jabong, and PhonePe for around $16 billion in exchange for approximately 77 per cent stake. Flipkart reported 51 per cent increase to Rs 30,164 crore in its consolidated revenue for FY18, first-year into acquisition, from the preceding year at Rs 19,854 crore while its losses increased 434 per cent from Rs 8,771 crore in FY17 to Rs 46,901 crore in FY18. For FY19, the revenue increased by 44 per cent to Rs 43,615 crore while losses dropped by 63 per cent to Rs 17,231 crore.

“Every time I go, I come back really energized. I came back into Doug’s (Walmart President and CEO) office, I said that is just – it’s a great business. They’re smart, they’re entrepreneurial,” said Biggs.

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Responding to a question by UBS analyst Michael Lasser on Flipkart to be a stand-alone business similar to Walmart’s Mexican business Walmex and others, Biggs said while Flipkart runs pretty independently currently as well, there is a case for it to go public. “Yes, we’ve talked about longer-term that IPO is a potential for that business.”

Walmart in a US SEC filing on May 9, 2018, had indicated the Flipkart IPO by 2022. The minority shareholders having 60 per cent of the Flipkart shares “acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of closing of the Transactions at a valuation no less than that paid by Walmart under the Share Issuance Agreement, subject to the satisfaction of certain other conditions regarding such offering (the “IPO”),” the filing had read.

Biggs, equally excited about PhonePe and learnings from its, said, “They’re really changing how that consumer interacts on financial services” and “so if they just do things really well in India, it can be a big business.”

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