Flipkart will tap the US equity market by 2022, the board of the Walmart-owned e-commerce marketplace decided earlier this month, said people aware of the matter.
Flipkart group CEO Kalyan Krishnamurthy has formally informed his top lieutenants about the IPO timeline, they said.
The Flipkart board meeting scheduled earlier this month, took place in Bentonville, Arkansas, on the sidelines of Walmart’s annual shareholders conference.
Krishnamurthy’s discussions with his core team comprising senior vice presidents emphasised the need to tighten compliance and achieve profitability over the next two years as it prepares to go public, they said.
The move comes at a time when Walmart may be looking to use an initial public offer (IPO) to partially or fully exit the Indian company in which it holds a 77% stake, a person familiar with the development said. The focus on profitability is also timely as Walmart saw its gross profit rate and operating income for its international business drop in the February-April quarter due to Flipkart’s inclusion in financial performance.
“In the last two weeks there have been discussions between the Flipkart CEO and his key people to chart out a plan to make the company IPO ready,” said one of the persons cited above. “Compliance and profitability will take centre-stage going forward. The top management has to start tailoring the company towards this and that’s the message coming from Walmart.”
For the 12-year-old, Bengaluru-based Flipkart, which is considered a flag bearer of the Indian consumer internet story, going public will also ensure further liquidity for investors including Walmart, Tencent, Tiger Global, as well as employees. ET reported May 10 that Flipkart disbursed a fresh set of employee stock ownership plans (Esops) worth more than $100 million to senior and middle-level staff as part of efforts to retain key talent a year into Walmart’s purchase of a majority stake in the Indian firm.
A definitive timeframe for the IPO and talking up profitability as an important metric are indicative of how Walmart is looking at Flipkart one year after the acquisition.
“Aside of policy changes that hit ecommerce players with implementation of new foreign direct investment (FDI) regulations, making the business profitable in a largely discount-led industry is challenging for Walmart,” said another person familiar with developments.
The company said it wouldn’t comment on the matter.
“We don’t comment on board discussions. However, as we have said before on this issue, an IPO has always been part of Flipkart’s ambitions and long-term strategy, but right now we don’t have a timeframe on that,” a Flipkart spokesperson said when asked about the company’s preparedness for going public.
When the American retailer acquired Flipkart last year, it had said an IPO was a possibility over the next four years. But on recent visits by Walmart CEO Doug McMillon and Judith McKenna, who heads Walmart International, there was no mention of an IPO timeline.
Compliance, Profitability
ET reported earlier that Flipkart had hired KPMG to conduct due diligence of vendors as part of parent company Walmart’s global anti-bribery compliance programme that has been now extended to the ecommerce company. Last week, the US Securities and Exchange Commission said Walmart had agreed to pay about $282 million to settle bribery charges faced by subsidiaries in Mexico, Brazil, China and India—the last pertaining to a case from seven years ago.
While Walmart continues to see an impact on expenses, interest and debt due to its Flipkart acquisition, CEO McMillon has said, “I continue to be excited about the opportunity with Flipkart and PhonePe. I’m impressed with the team and their ability to innovate for customers with speed.” PhonePe is an online payment platform run by Flipkart.
