Walmart could launch an initial public offering of Flipkart – the Indian eCommerce player in which it just bought a majority stake for $16 billion – in as soon as four years.
Reuters, citing a filing with the U.S. Securities and Exchange Commission (SEC), reported that this is the first time Walmart has given a potential path and timeline for an IPO of Flipkart. In the filing with the regulator, Walmart said that minority investors in Flipkart, which have 60 percent of the online retailer's shares, could act together to require Flipkart to launch an IPO in four years after the transaction is closed.
The IPO, said Walmart in the regulatory filing, will be done at no less of a valuation than what Walmart invested in Flipkart.
According to the filing, two board directors will be named from the minority shareholders, and Bansal will have one seat on the board. Walmart noted that it could add a sixth board member if the majority of the Flipkart directors sign off on that. Walmart or its unit could also request that Flipkart issue new shares up to $3 billion before the deal closes, and on or before the first anniversary of the deal. No party has to pay a termination fee if a share issuance or purchase agreement with Flipkart is terminated, said Walmart.
Last week, Walmart announced it was paying $16 billion to acquire a majority stake in the India-based eCommerce company. In a press release, Walmart said the deal still needs the approval of antitrust regulators in India, but once that step is completed, the retailer will own 77 percent of Flipkart. The remainder of the business will be held by existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft.
Under the terms of the deal, the investment in Flipkart includes $2 billion of new equity funding, which Flipkart will use to accelerate growth. The two companies are also in talks with other potential investors who could join the round, lowering Walmart’s investment stake once the deal is complete. Walmart noted that even with other investors, the retailer will still hold a majority stake. Tencent and Tiger Global will remain on Flipkart’s board, which will also include Walmart executives and independent members.