(ATF) US retail giant Walmart said on Thursday December 10 that it will triple its exports of India-made products to $10 billion each year by 2027, in a move that might be a prelude to an IPO of its Flipkart unit.
India is already among Walmart's top sourcing markets for products such as jewellery and homeware, with annual exports of about $3 billion, said Walmart, and this move will help the retail giant to expand the global reach of products from the South Asian nation.
Exports from India will help Walmart to support India’s key Make-in-India initiative, as well, the firm said, adding that the commitment to deeper sourcing from India will include helping to develop hundreds of new suppliers across categories such as food, pharmaceuticals, consumables and apparel.
“This is very good news and an encouraging sign that Walmart is progressing in the right direction with its India plans,” Ankur Bisen, senior vice president of retail and consumer products consultancy Technopak, told Asia Times Financial.
It signifies that Walmart is not only looking at India as a market for consumers, but as a destination market as well, and that aligns with the push of the current government to increase exports from India, the country’s competitiveness, and support its small and medium enterprises (SMEs), he added.
“Most of Walmart’s sourcing already comes from India’s SMEs and that's the advantage of a liberal market. Walmart being the largest retailer in the world is also a powerhouse for Indian SMEs to grow exports,” Bisen said.
The announcement comes at a time when India has been encouraging local and multinational companies to “make in India for the world.”
"By significantly accelerating our annual India exports in the coming years, we are supporting the Make in India initiative and helping more local businesses reach international customers, while creating jobs and prosperity at home in India," Walmart's chief executive officer Doug McMillon said in a statement.
A brainchild of India's Prime Minister Narendra Modi, "Make in India" is a national programme designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best in class manufacturing infrastructure in the country.
The primary objective of this initiative is to attract investments from across the globe and strengthen India’s manufacturing sector.
The Modi administration has so far offered incentives worth $28 billion for businesses to set up factories in the country, and hopes that the programme will woo investors looking to exit China amid its rising tension with the US.
The Walmart commitment could also help to combat critics who have been alarmed by the rise of American giants like Amazon and Walmart's own Flipkart in India’s fast-growing e-commerce space.
Alleging that these two retailers are using their dominance to create an unfair playing field in the retail sector, the Confederation of All India Traders, an association of over 60 million small retailers, complained in late November that Flipkart and Amazon were offering cash backs and incentives to shoppers through select credit and debit cards.
But there could be more to the announcement. “Flipkart’s future IPO plans may have also propelled Walmart to accelerate the sourcing plan in India,” said Bisen.
In September, Reuters reported that Walmart has hired Goldman Sachs to explore a share sale for its Flipkart unit in the US to raise around $10 billion.
In 2018 Walmart acquired about 77% of Indian e-commerce firm Flipkart for roughly $16 billion, marking the biggest deal in India's e-commerce sector, where it competes with its US rival Amazon's local unit.
In July, Walmart increased its stake in Flipkart to over 82% by leading another $1.2bln financing round in Flipkart. In a reverse acquisition move, the Bengaluru-based Flipkart acquired a 100% stake in Walmart India’s cash-and-carry business - Best Price - that operates 28 stores and two fulfilment centres.
This reverse acquisition was done to help Flipkart expand its footprint in the food and grocery segment and strengthen its supply chain, Flipkart said in announcing the deal.
While announcing its increased exporting commitment, Walmart CEO Doug McMillon reiterated the company’s commitment to seeing Flipkart go for an initial public offering overseas.
“As we invested, we did mention that our plan is to IPO and that hasn’t changed,” McMillon said at the event on Thursday December 10.
Both Flipkart and its digital payments company PhonePe, one of the earliest apps in India’s digital payments landscape alongside Google Pay, are fast growing and have room for more investors, and could diversify in several ways, including IPOs, according to McMillon.
Last week, PhonePe raised $700million from investors at a level that reportedly boosted its enterprise valuation to $5.5 billion.
PhonePe is reportedly considering an IPO with a valuation of $7 to $10 billion for listing either abroad or in India around 2023. Flipkart’s IPO could value the company at $50 billion, according to Reuters.
Although based in Bengaluru, Flipkart is registered in Singapore, and taking the company public in the US could help Walmart sidestep restrictions on Indian companies listing on foreign stock exchanges.