Walmart may edge out Amazon in the race to buy holding stake in India’s Flipkart

• Walmart's will potentially be bidding to acquire more than 51% stake in Flipkart by investing up to $8-10 billion.
  
• Other major investors include SoftBank (23% stake), Tiger Global (20% stake) and Naspers (16.6% stake).
• SoftBank is willing to pump in an additional $3-4 billion, if Flipkart opts to pursue Amazon's offer instead of Walmart.

Despite Amazon’s bid to buy a 60% stake in India’s Flipkart, reports say the deal will go in Walmart’s favour. Talks of Walmart wanting to acquire a massive stake of Flipkart have been on since February. And with that news, a number of companies, including Google and Amazon, seem to want a piece of Flipkart’s pie.

The Bentonville-based retail giant, Walmart, has been itching to expand its online presence into the remaining Asian markets. If this deal materialises -- its biggest e-commerce bet anywhere globally -- will also trigger a re-rating of its stock market valuation, which is currently second only to Amazon. A source told Times of India (TOI) that “the shareholding agreement with Walmart is still to be signed. But it is unlikely that Amazon will come in now. Walmart and Flipkart are agreeing on the deal terms, for now.”

Sources with knowledge of the proceedings told TOI that SoftBank has been favouring the merger with Amazon instead of Walmart. For this, it is also willing to pump in an additional $3-4 billion, in case Flipkart opts to pursue Amazon's offer instead of Walmart.

While most other investors are keen on Walmart’s cashout deal, SoftBank, wants to maintain its 20% stake in the combined Flipkart-Amazon entity. The additional amount can in-turn be deployed to buy shares from smaller investors. Flipkart has been valued at around $20 billion and its major investors include SoftBank (23% stake), Tiger Global (20% stake), Naspers (16.6% stake) and Accel Partners (one of the early investors in Flipkart that hold less than 10% stake).

However, this idea does not fly with the other major investors who believe -- and perhaps rightly so -- that the potential merger with Amazon would not go past the Competition Commission of India (CCI). The CCI, founded in 2003, is a statutory body responsible for enforcing The Competition Act, 2002 which aims at preventing activities that have a significantly adverse effect on competition in India.

Plus, the merger with Amazon would potentially irk the different sections of the trading community.

However, SoftBank maintains, Flipkart and Amazon combined will only manage a mere 1.5% stake in the broader Indian retailing industry and therefore is unlikely to run into regulatory hurdles.

The Japanese company’s founder and chairman Masayoshi Son saw the potential merger between the two e-commerce behemoths as a way to get his company a bigger play in India’s promising e-commerce market. Just last year, it invested an additional $2.5 billion in Flipkart.

According to a Times of India article from 14 March, Walmart's potential bid to acquire more than 51% stake by investing up to $8-10 billion in Flipkart may just nudge SoftBank to part-sell its shares. However, Masayoshi Son told TOI a few days ago, “We are involved in discussions with key shareholders and the management. Either way, we are happy. It is nice to have good offers and we are always open to discussing different options and are always flexible for a good return and success of the company.”

All this aside, another source said that the Flipkart board already agreed to Walmart’s offer a few days ago, thereby possibly thwarting Amazon’s intention to sweep in and win the game.