Walmart might exit Flipkart post new FDI rules, says Morgan Stanley

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.

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According to a new report by US investment banker, Morgan Stanley Walmart may exit Flipkart after India's new Foreign Direct Investment (FDI) norms for e-commerce companies came into force.

Walmart might exit Flipkart post new FDI rules, says Morgan Stanley

 

"An exit is likely not completely out of the question with the India e-commerce market becoming more complicated," said Morgan Stanley, in a report 'Assessing Flipkart Risk to WMT EPS.'

"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," the report said. "We estimate that Flipkart derives 50 percent of its revenue from this category, meaning Flipkart could face meaningful disruption and top-line pressure in the near term," report further said.

Meanwhile, there is a report that Walmart refuted the claim of the report.

To recall, last year in August Walmart Inc. and Flipkart have announced the closing of the agreements for Walmart to become the largest shareholder in the Flipkart Group.

Walmart now holds approximately 77 percent of Flipkart. The remainder of the business is held by other shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global and Microsoft Corp. Moving forward, Flipkart's financials will be reported as part of Walmart's International business segment.

Moreover, Flipkart's existing management team will continue to lead the business. Tencent Holdings Limited and Tiger Global Management LLC will remain represented on the Flipkart board, in addition to independent board members, and will be joined by new members from Walmart.

The board will work to maintain Flipkart's core values and entrepreneurial spirit while ensuring it has strategic and competitive advantages.

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