January 30, 2018 / 8:47 PM / 21 days ago

UPDATE 2-Walmart in talks to buy minority stake in India's Flipkart - report

* Walmart may acquire stake of 15 to 20 pct in Flipkart - paper

* Stake of 20 pct pricey, difficult - sources (Adds sources, analyst comment, background)

By Sankalp Phartiyal

MUMBAI, Jan 30 (Reuters) - U.S. retailer Wal-Mart Stores Inc is in advanced talks to buy a minority stake in India’s leading homegrown e-commerce firm Flipkart, the Economic Times newspaper said on Tuesday.

Walmart could acquire a stake of 15 percent to 20 percent in Bengaluru-headquartered Flipkart, the main challenger to U.S. tech giant Amazon.com Inc’s India ambitions, the daily said, citing two anonymous sources.

Walmart has held intermittent talks with Flipkart over the past two years, two sources familiar with the matter told Reuters, asking not to be identified as the talks are confidential.

The two companies signed a non-disclosure pact in 2016 that was renewed last year, one of the sources said.

In September 2016, Reuters reported Walmart was in talks to buy a minority stake in Flipkart. [reut.rs/2dCBJzs ]

Walmart is likely to make a significant investment in Flipkart if the talks lead to a deal, both sources said, adding, however, that buying a stake of 15 percent to 20 percent in the online marketplace could be pricey and difficult as it recently raised funds.

Last year, Japan’s SoftBank Group invested nearly $2.5 billion in Flipkart through both primary and secondary investments. Flipkart also secured $1.4 billion from China’s Tencent, online marketplace eBay and software giant Microsoft.

SoftBank owns roughly a fifth of Flipkart, while U.S. hedge fund Tiger Global Management owns a stake of slightly less than 20 percent, one of the sources told Reuters.

A Walmart-Flipkart deal could be finalised as early as March, and may involve a direct investment and secondary sales by some longstanding Flipkart investors, the Indian paper said.

It makes little sense for Walmart to buy a stake in Flipkart unless it is looking to fully acquire the firm, said Harminder Sahni of retail consultant Wazir Advisors.

A potential union of SoftBank-backed Chinese e-commerce player Alibaba and Flipkart would pose a more formidable challenge to Amazon, he added.

Betting on Flipkart, though, will intensify Walmart’s battle with Amazon that has hurt brick-and-mortar rivals like it in their home U.S. market, pushing them to invest in online retail, offer discounts and improve the in-store shopping experience.

Spokesmen for Flipkart and Walmart declined comment, saying the firms do not respond to market rumours or speculation. (Reporting by Sankalp Phartiyal in MUMBAI, Sangameswaran S in BENGALURU; Additional reporting by Nandita Bose in NEW YORK; Editing by Sai Sachin Ravikumar and Clarence Fernandez)

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