September 28, 2016, 11:59 pm / Business

Wal-Mart is asking the price in India

This way he can finally boost his business in India Pritika Rana Rick Carew

Wal-Mart may invest in Indian online retailer Flipkart. Then the world's largest chain of stores will finally begin to actively develop in India / SCOTT OLSON / AFP

The world's largest retailer Wal-Mart Stores is in talks with Flipkart, the largest Internet company in India. Investments in this startup were announced by a source familiar with the situation. If the parties agree on cooperation, Wal-Mart will be able to strengthen its position in the market of the third largest economy in Asia.

A Wal-Mart India spokesman declined to comment on the possible deal; So did the Flipkart representative.

Wal-Mart's investment in Flipkart comes in the spirit of recent shifts in the world's largest retailer's online strategy as it seeks to revive online sales growth and improve competitiveness against a rising Amazon. In September, Wal-Mart completed its takeover of American online retailer Jet.com Inc. for $3.3 billion, and earlier, in June, sold its Chinese Internet business to local JD.com in exchange for a 5% stake in it.

Wal-Mart's online sales reached nearly $14 billion, or 3% of its $482 billion in sales last year. But the retailer's quarterly online sales growth has been slowing over the past few years. Amazon's revenue was $107 billion in 2015 and its growth is outpacing Wal-Mart's.

Investing in India's Flipkart could help Wal-Mart pave the way for expansion in the country, which has so far been a challenge for the US company, analysts say.

In 2013, after years of lobbying and efforts to reach India's 1.2 billion consumers, Wal-Mart shelved plans to aggressively build supermarkets in the country. The retailer cited too strict market regulation. Indian law requires foreign trading companies to ensure that local products account for at least a third of the turnover of their stores in this country. Wal-Mart currently has 21 distribution centers in India, none of which are allowed to sell directly to the average consumer.

Flipkart, in the event of a deal, will get the money it needs and a strong partner in the battle against Amazon. The latter, like Uber Technologies Inc. and other startups, has turned its attention to the Indian market amid a slowing Chinese economy. Morgan Stanley forecasts that India's e-commerce market will reach $100 billion by 2020, up from $3 billion back in 2013.

Flipkart and some other Indian startups have had a harder time raising funds from investors in recent times. Indian online merchants have lost millions of dollars on deep discounts on products ranging from smartphones to shoes, and analysts are expecting a market shakeout.

Some investors pegged Flipkart's value at $9 billion in 2016, says a banker familiar with the company's business, up from $15 billion in 2015 when the Indian startup received shareholder funding.

A few months ago, Flipkart discussed possible investments with JD.com, but the negotiations did not lead to a deal, the source knows.

Translated by Natalia Ishchenko