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‘New FDI rules can push Walmart to exit Flipkart’

‘New FDI rules can push Walmart to exit Flipkart’

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  6 Feb 2019 6:18 AM GMT

New Delhi: Retail giant Walmart, which paid $14 billion for Flipkart stock with a promise of an additional $2 billion in physical structure investment, may exit after India’s new Foreign Direct Investment (FDI) norms for e-commerce companies came into force, US investment banker Morgan Stanley has warned. “An exit is likely, not completely out of the question, with the Indian e-commerce market becoming more complicated,” Morgan Stanley said in a report late Monday. The Walmart-Flipkart saga might turn out to be similar to what happened with Amazon in China in late 2017.

“There is a precedent for an exit as Amazon retreated from China in late 2017 after seeing that the model no longer worked for them,” read the report. “We estimate that Flipkart derives 50 per cent of its revenue from this category, meaning Flipkart could face meaningful disruption and top-line pressure in the near term,” it added. The new FDI rules may require Flipkart to remove as much as 25 per cent products from its platform including smartphones and electronics that constitute a bulk of sales. There is a lot riding for both know that this is the last frontier in terms of a consumption market, since India consumes 67 per cent of its own $2.6 trillion GDP. Interestingly, Walmart runs Flipkart as a stand-alone entity. On February 1, disruption was caused in the e-commerce operations in India of the two companies after the new FDI norms for the e-commerce sector came into effect. (IANS)

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