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Flipkart Plans to Raise $ 1 Billion, Considers an IPO in the US

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Walmart established Flipkart, e-commerce delivery platform, is in preliminary talks with a slew of new investors to raise at least $1 billion, whilst it considers an IPO in the US in the fourth quarter of this year.

The capital raise, which could reach $2 billion depending on investor interest, is primarily to fund expansion, catalyze its sum-of-parts valuation, and contend with deep-pocketed competitors such as Amazon and Reliance Jio Retail, according to the people.

Some analysts, on the other hand, were surprised that Walmart Inc is not pouring new money into the venture and is instead primarily pursuing outside investment, while others argued that a capital raise from outside investors at this point could help set a valuation benchmark.

Flipkart is expected to be priced at $28-30 billion in this round, which is higher than its previous round but lower than the $35-40 billion previously estimated. There will be no governance or shareholder rights, which some believe will discourage active investors and buyout funds from participating.

"The capital raise is not being marketed as a pre-IPO, but rather as a means of expanding the business. The management claims that there is a lot of value stuck in each of the company's main verticals, and that the value of parts is greater than the value of the whole "On the condition of anonymity because the discussions are private. The process of price discovery is still underway. Simultaneously, proposals for a US listing are in the works, with SPAC as a backup", a senior executive involved in the process said.

Walmart invested $1.2 billion in Flipkart in July 2020, at a $24.56 billion valuation, to raise its shareholding to 77.8 percent, according to data intelligence platform Tracxn.

Current investors Qatar Investment Authority and Tencent of China each placed in $ 79.1 million in this round, representing the first significant cash infusion since Walmart bought a 77 percent stake in the company for about $16 billion in 2018 at a valuation of $21 billion. Flipkart was set to go public in four years, according to the US retailer at the time.

At the time of the acquisition, Walmart had only invested around $2 billion in primary capital into Flipkart, with the rest going to buy out current investors' shares.

Emails sent on Monday evening to Walmart, Flipkart, Kalyan Krishnamurthy, CEO, Flipkart Group; GIC, QIA, and Goldman Sachs received no response as of press time.

"Investors coming in at this point will like a pop at the time of an IPO, so valuations would be changed accordingly”, said one of the investors who had been approached.

"For example, Zomato has stated in its IPO prospectus that it will pursue such a pre-IPO placement”, he continued.

A pre-IPO placement usually occurs after a prospectus has been filed with the regulatory authorities.

"The capital raise is not being marketed as a pre-IPO, but rather as a means of expanding the business. The management claims that there is a lot of value stuck in each of the company's main verticals, and that the value of parts is greater than the value of the whole "On the condition of anonymity because the discussions are private. The process of price discovery is still underway. Simultaneously, proposals for a US listing are in the works, with SPAC as a backup", a senior executive involved in the process said.

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