Walmart earmarks $1.2 billion to fund Flipkart’s operations

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Published: June 12, 2019 6:32:54 PM

Flipkart's parent Walmart has earmarked around $1.2 billion to "fund the operations of Flipkart," the company said in its quarterly (ending April 30, 2019) report.

Walmart’s CEO Doug McMillon has been impressed with the Flipkart technological prowess and business growth. (Image: Bloomberg)

Walmart — global retail giant and Flipkart’s parent — has earmarked around $1.2 billion out of its $2.7 billion in cash and cash equivalents as on April 30 this year to “fund the operations of Flipkart,” the company said in its quarterly (ending April 30, 2019) report filing with the US Securities and Exchange Commission last week.

“Of the $2.7 billion at April 30, 2019, approximately $1.2 billion can only be accessed through dividends or intercompany financing arrangements subject to approval of the Flipkart minority shareholders; however, this cash is expected to be utilized to fund the operations of Flipkart,” according to the filing seen by Financial Express Online.

Flipkart existing shareholders reportedly include Tiger Global Management, Microsoft, Tencent, co-founder Binny Bansal etc.

“This means that of the $2.6 billion that they have parked in Flipkart Singapore and Flipkart India, they can freely repatriate only $1.2 billion, after the consent of Tiger, Microsoft and other shareholders,” Vivek Durai, founder, Paper.vc told Financial Express Online.

Even as Walmart’s CEO Doug McMillon has been impressed with the Flipkart technological prowess and business growth, the latter had brought down Walmart’s earnings from its international business as well as its overall operating income.

Walmart International’s operating income reduced by 41.7 per cent from $1.3 billion in Q1 FY19 to $700 million in Q1 FY20 primarily due to “dilution from Flipkart, which was expected, partially offset by the deconsolidation of Brazil,” said Walmart’s EVP & CFO Brett Biggs in its Q1 FY20 earnings.

Also, its overall operating income went down by 4.1 per cent to $4.9 billion even as it was “better than planned” as Walmart U.S. and Sam’s Club’s (retail warehouse clubs) positive results “were offset by the inclusion of Flipkart this year,” the company had said.

The operating income for Walmart U.S. went up by 5.5 per cent to $4.1 billion from $3.9 billion in Q1 FY19 and Sam’s Club’s operating income increased by 38.8 per cent to $500 million from $300 million in Q1 FY19.

The earmarked capital would further boost Flipkart’s growth even as it led India’s online retail market share with 31.9 per cent in 2018 followed by 31.2 per cent share of Amazon, as per a May 2019 report by Forrester.

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