Walmart could exit from Flipkart because of India’s new FDI rules: Report

• Morgan Stanley has warned that Walmart may exit from Flipkart.
  
• India’s new e-commerce rule brought in tighter FDI guidelines in order to boost Indian marketplaces.
  
• Under new rules, Flipkart will have to do away with 25% of its products on the platform.

Walmart’s biggest ever deal in history could soon be a thing of the past.

Walmart’s acquisition of Indian unicorn Flipkart for $16 billion was one of the world’s biggest e-commerce deals. It now stands in jeopardy as the retail giant could make an exit from Flipkart in the wake of India’s new e-commerce rules, according to a report by Morgan Stanley, which said an exit by Walmart is not out of the question with the Indian e-commerce market becoming “more complicated.”

“Despite the recent changes in regulations, we remain optimistic abo the ecommerce opportunity in India given the size of the market, the low penetration of ecommerce in the retail channel and the pace at which it is growing. As Walmart scales in India, the company will continue to partner to create sustained economic growth across agriculture, food and retail. Future investments will support national initiatives and will bring sustainable benefits to the country,” a Walmart spokesperson told ET.

India’s new e-commerce rules have introduced tighter guidelines that govern Indian e-commerce companies. With the new rules, global players like Amazon or the Walmart-Flipkart entity, are barred from selling products from vendors they have own a stake in.

According to the Morgan Stanley report, Flipkart will have to do away with 25% of its products on the platform.

The new rules have mounted tremendous pressure on both Amazon and Flipkart, which together command over 60% of the market share in Indian e-commerce. According to a report in ET, Amazon and Flipkart saw a third of their sales volume disappear in just three days, after the new rules came in.

Last week, Amazon reportedly already began removing several items from its website sold via its vendor Cloudtail including products under the brand name “Amazon Basics”.

Walmart which has failed to make an impact on e-retail globally, had placed its bets on Flipkart to start off its digital wing. Flipkart being one of the biggest e-commerce platforms of India, put Walmart in direct competition with Amazon. However, with the change in scenario it is possible that Walmart might not want to incur a loss in India.

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