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Why Walmart’s Reportedly Mulling a $25 Billion India Investment

Walmart is already in a race with Amazon for supremacy of the U.S. consumer market place, and now it looks like India could be their next target.

India is a huge market, and there’s such a substantial amount of growth ahead that it’s enough to give everyone who enters the retail market space a decent slice of the overall pie.

“Based on Reliance’s 2019-20 annual report, the Indian retail market is estimated to be $822 billion, with a projected [compound annual growth rate, or CAGR] of 10 percent through 2024-25. Importantly, the organized retail market share is just $89 billion or 11 percent, with projected CAGR of 21 percent to $230 billion by 2024-25. This is a massive opportunity for retailers like Amazon and Walmart,” said Joseph Feldman, equity analyst at Telsey Advisory Group.

A Statista projection estimates that India’s retail market could reach $1.7 trillion by 2026.

The spotlight turned to India on Tuesday following media reports that Walmart is in discussions with Indian conglomerate Tata Group. The American retail giant is reportedly interested in investing between $20 billion to $25 billion to form a joint venture building a new “super app.” This new software, according to reports, is seen as creating synergies with Walmart’s Flipkart business and include a range of Tata’s consumer and retail businesses, making it a massive one-stop shopping platform. The venture is believed to have a valuation of about $55 billion, and could be launched by the end of the year or in early 2021.

A Walmart spokesman described the reports as “baseless speculation,” adding that the company has no comment on the matter. A spokesman for Goldman Sachs, Walmart’s reported investment banker on the Tata deal, declined to comment.

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Separately, Flipkart earlier this month was said to be preparing for an initial public offering that could come as early as next year. Walmart acquired a 77 percent stake in the Indian e-commerce giant in August 2018 for $16 billion. If Flipkart’s IPO gives it a valuation of $50 billion, as some predict, that would more than double Walmart’s investment in the company. Still to be decided is where the Indian e-commerce giant would list its shares. The company is incorporated in Singapore, but could list the IPO shares in the U.S., as many Asian tech stars have done.

And competing Indian conglomerate Reliance Group is said to be seeking investments in its Reliance Retail Ventures Ltd. The company has reportedly asked Amazon to consider an investment stake.

Reliance Retail is the retail arm of Reliance Industries, and last week was said to be a top contender to acquire U.K.’s distressed Debenhams, which in April fell into administration.

Reliance is slated to sell a 1.28 percent stake in its retail arm to U.S. private equity firm KKR & Co. for $754 million. Earlier this year it received a $1 billion investment from another U.S. private equity firm Silver Late for a 1.75 percent stake. A third U.S. private equity firm, General Atlantic Partners, will invest $498.9 million, or 36.75 billion rupees, for a 0.84 percent stake in the retail unit.