Flipkart's overseas IPO will help fetch good institutional investors

Experts point out overseas IPO will help Flipkart capitalise on Walmart’s power

flipkart Representative image | Flipkart

Flipkart’s plans for an overseas IPO in the US or some other foreign location such as Singapore, possibly in 2021, will help it fetch good institutional investors who may be interested in investing in their India story. The sudden rise of e-commerce in India, especially expanding with the COVID-19 pandemic, with people staying indoors and ordering online, has helped the company capitalise on the India opportunity. This may give Flipkart the much-needed thrust it needs in the international market, where it is reported to be valued at $40-45 billion.

There is no doubt that Flipkart has achieved financial milestones in India and that is reflective of the steady state of growth in the country. In parallel, the launch of online offerings of Jio Mart is likely to enhance the competitive intensity of the Indian market. This might call for more investment on part of Walmart in the Indian market. To obviate this situation, an international IPO will make enormous sense.

“By going in for an IPO in the international market, it is going to help Walmart de-risk itself and also, the offer is likely to be sold at a premium because there are not many assets in the emerging markets that offer this kind of depth and scale such as Flipkart,” explained Alok Shende, Ascentius Consulting.

At the same time, economic recovery or growth in India cannot be driven by the consumption theory alone and capital is a key driver, which warranted a long overdue reform allowing Indian companies to list directly in overseas markets.

“Flipkart holding over 60 per cent of the e-commerce market share in India is in an excellent position to avail the opportunity and has the added advantage of leveraging the brand equity of Walmart—it’s parent company—more specifically in the US. Given the latest valuation closer to $25 billion as opposed to its proposed value at $45 billion, Flipkart, while listing in US, would deliver more than double the value of investments to Walmart in a short span of time, which is a great thing,” remarked Subramanyam Sreenivasaiah, CEO at Ascent HR.

Experts point out that an overseas IPO will help Flipkart capitalise on the power of the Walmart brand internationally. This is expected to be supplemented by its India growth story and will help attract great institutional investors.

“There is high institutional interest for at scale India Internet opportunities. Flipkart is uniquely positioned in the larger global ecosystem of Walmart, which, through an international listing, could potentially capture some of the India interest with institutions and potentially capture best value for Flipkart, including its potential in international markets,” said Pankaj Karna, managing director, Maple Capital Advisors.

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