Tag: flipkart

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Will ONDC Disrupt E-Commerce in India?

Suppose there’s a small bakery in Bengaluru that sells delicious cookies. The owner wants to take his business online, but he feels it will be extremely difficult. He’ll need to make a sizeable investment for creating an online store, inventory management, and order fulfillment. Even after all this, it’s an exhausting process to get customers online. The owner will have to spend a hefty amount for ads and believes it’s not worth the time and effort.

Sure, he could list his products on large platforms like Amazon.com and Walmart-owned Flipkart. However, these global corporations control over 60% of the e-commerce market and give preferential treatment to top sellers.

So how can the bakery owner sell his products online?

Well, he could look into the Open Network for Digital Commerce (ONDC)! And no, it’s not a separate e-commerce platform or app. In this article, let’s understand what ONDC is all about!

What is ONDC?

ONDC is a non-profit company established by our govt’s Department for Promotion of Industry & Internal Trade (DPIIT). It is a network that will allow any seller to display their products and services in search results across all apps registered in it. ONDC will have open protocols and rules for the entire chain of activities involved in the exchange of goods and services (similar to the Unified Payments Interface or UPI for payments in India). Thus, buyers and sellers can trade goods and services irrespective of the applications they use.

For instance, small and medium-sized businesses can now set up a simple website with the help of ONDC’s technology partners and list their products and services on it. And once they integrate with ONDC, their products will be easily visible to consumers on different apps and platforms! ONDC would standardise operations like time-based pricing, inventory & order management, delivery, and digital cataloging for small retailers.

On a wider scale, ONDC network is designed to facilitate any digital transaction between a buyer and seller for goods or services, including wholesale, mobility, food delivery, logistics, and travel services. It will also cover business-to-business (B2B) transactions.

We’ve all seen UPI revolutionising payment systems in India. Similarly, ONDC aims to democratise e-commerce and give small merchants or family-owned stores access to the systems and technology used by giant e-tailers like Amazon & Flipkart. ONDC is expected to increase competition in the e-commerce industry and boost startup innovation.

How Does it Work?

  • ONDC lies in the middle of the interfaces hosting the buyers and the sellers.
  • Sellers will have apps to place their products for sale and accept orders.
  • As consumers, we can use any app registered on the ONDC network to browse and buy products. 
  • The ONDC network will also have apps that broadcast the search request received from buyer-side apps to seller-side apps listed on the ONDC registry.
  • The network will be supported by logistics firms (to facilitate deliveries) and e-commerce store hosting service providers. 

For example, when you’re searching for a laptop on Paytm → The app will connect to the ONDC network → ONDC will connect it to seller-side apps that list all firms from where you can buy the item.

You will be able to download any ONDC app of your choice (similar to UPI) and use it to buy products & services from sellers that offer them.

Major Challenges

  • ONDC is a complex ecosystem to implement. E-commerce has a lot of variables involved, including the quality of the product, payments, returns, customer complaints, etc.
  • Brands that make misleading or inferior products and offer poor after-sales support may get undeserved exposure through the network. Users would find it difficult to trust new brands or platforms that integrate with ONDC.
  • It will require a massive, well-funded adoption campaign to bring in lakhs of existing Kirana stores to the ONDC network.

The Way Ahead

Since 2020, the Competition Commission of India (CCI) has been investigating the alleged anti-competitive practices of Amazon and Flipkart. As per reports, both firms promote specific sellers based on exclusive arrangements and offer them deep discounts. E-commerce giants also allegedly use data derived from users’ buying patterns to help their seller “partners” launch products.

Rather than concentrating power among a few players, ONDC will allow consumers and sellers to choose which apps they want to use to access a single network. With the ONDC network, these big online e-commerce platforms will have to compete with smaller stores, websites, and brands! ONDC expects to increase e-commerce penetration in India from 8% to 25% in the next two years. It also plans to sign up 90 crore buyers and 12 lakh sellers to the network within five years! 

ONDC has commenced trials with select buyers and sellers across major cities in India. We’ve seen numerous companies integrating with ONDC over the past few months. Microsoft, Paytm, Snapdeal, Dunzo, eSamudaay, PhonePe, SBI, HDFC Bank, ITC Store, and India Post have shown interest in joining ONDC. Even Flipkart, Reliance Retail, and Amazon are reportedly in talks to join the network! We’ll have to wait and see how well it is implemented.

What are your thoughts on ONDC? Let us know in the comments section of the marketfeed app.

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Editorial

Why Did Reliance Shelve its E-Commerce Marketplace Plans?

Reliance Industries Ltd (RIL) is reportedly postponing its plans to launch a standalone e-commerce platform for third-party sellers and compete with Amazon and Flipkart. The company aimed to create a mega online platform for users to buy groceries, clothes, electronics, home, appliances, and more. Meanwhile, thousands of independent sellers have been integrated into its existing platform (JioMart) already. 

In this article, we explain why the Mumbai-based multinational conglomerate decided to halt its plans to develop its e-commerce platform.

Reliance’s Entry Into the E-Commerce Space:

India’s biggest retailer, Reliance Retail Ventures Ltd, has more than 12,000 stores across India. The company expanded its e-commerce operations in recent years with ventures including Ajio, JioMart, and the webstore of Reliance Digital. Ajio, launched in 2016, is Reliance’s fashion e-commerce venture. JioMart (launched in 2019) is the umbrella marketplace for grocery, value fashion, electronics, and a few other categories. The electronics retail chain, Reliance Digital, operates its own app and webstore. 

Despite the bleak conditions of the pandemic, JioMart, Ajio, and Reliance Digital’s webstore performed well when consumers heavily relied on online channels to make purchases. Reliance Retail also hired more than 65,000 people during the pandemic, out of which more than 53,000 were freshers. Reliance attained e-commerce sales of around ₹3,496 crore in 2021, yet it still lags market leaders (and key rivals) Amazon and Flipkart.

RIL’s Further Expansion in E-Commerce 

In order to compete with industry giants Amazon and Flipkart, the Mukesh Ambani-led business is now developing JioMart as a full-fledged marketplace with a strong presence across all categories. According to reports that surfaced in August 2022, RIL was building a separate online marketplace called JioMarket and onboarding third-party sellers to the platform. This would have allowed Reliance to comply with the Indian government’s draft e-commerce policy. Let’s learn what this policy entails:

The policy proposes to ban marketplace operators from having related parties or associated enterprises as sellers on their platforms. The companies or brands associated with e-market organisations will not be listed in their marketplaces. Only third-party sales are to be permitted. The government is promoting “algorithm fairness,” which forbids e-marketplaces from giving certain sellers preferential consideration. Such a policy would ensure that independent sellers receive fair treatment. E-market organisations are also frequently accused of sharing consumer data and purchasing habits with some preferred sellers. Thus, strict laws will be pushed to safeguard consumer rights.

Now, the government has put the proposed e-commerce policy on hold. So Reliance Industries has abandoned its plan to create a separate e-commerce marketplace for third-party sellers. Instead, it has integrated thousands of independent sellers into its prevailing platform, JioMart. 

JioMarket was designed to adhere to the suggested e-commerce policy standards. RIL intends to establish a single platform, JioMart, which it will construct to the scale of Amazon and Flipkart to compete against them. Now that the policy is taking a backseat, it would have been challenging to grow two platforms to fight against these formidable competitors.

The Way Ahead

JioMart has already onboarded more than 15,000 third-party independent sellers and direct-to-consumer (D2C) brands that Reliance Retail had roped in over the last 3-4 months for JioMarket. The total collection on the platform has gone up 80 times as compared to last year’s Diwali. It has also begun a month-long festive sale with discounts comparable to those offered by Amazon and Flipkart, with some undertaken by third-party sellers and D2C brands.  

E-commerce has revolutionised how businesses operate in India. As per an IBEF report, the Indian e-commerce market is predicted to grow by 21.5% to reach $74.8 billion by the end of 2022! Amazon is hailed as the  #1 e-commerce company in India, while Flipkart is neck-to-neck in competition for supremacy. 

Will JioMart face an uphill task to compete with Amazon and Flipkart, or will it give a tough fight to e-commerce giants like Amazon and Flipkart? Let us know your views in the comments section of the marketfeed app!

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TCS Reports 15% YoY Rise in Net Profit in Q4 – Top Indian Market News

TCS Q4 Results: Net profit rises 15% YoY to Rs 9,246 crore

Tata Consultancy Services (TCS) reported a 14.8% year-on-year (YoY) increase in net profit to Rs 9,246 crore for the quarter ended March (Q4). The IT firm’s revenue rose 9.4% YoY to Rs 43,705 crore during the same period. The company’s revenue from the Banking, Financial Services, and Insurance (BFSI) vertical rose 15% YoY to Rs 17,559 crore. TCS’s board has recommended a final dividend of Rs 15 per share. 

Read more here.

Retail inflation rises to 5.52% in March; IIP contracts 3.6% in February

Retail inflation in India, measured by the Consumer Price Index (CPI), rose to 5.52% in March 2021. The CPI had increased steeply from 4.06% in January to 5.03% in February— due to a surge in food and fuel prices. Meanwhile, the Index of Industrial Production (IIP) contracted by 3.6% in February. The overall industrial output had contracted by 1.6% in January. The manufacturing sector output contracted by 3.7% in February, while mining output declined by 5.5%.

Read more here.

Flipkart partners with Adani Group to strengthen logistics, data centre infrastructure

E-commerce major Flipkart has entered into a commercial partnership with the Adani Group to strengthen its logistics and data centre capabilities. Flipkart will work with Adani Logistics (a wholly-owned subsidiary of Adani Ports) to strengthen its supply chain infrastructure and further enhance its ability to serve its rapidly growing customer base. The Walmart-owned company will also set up its third data centre at AdaniConneX’s Chennai-based facility. This partnership will create around 2,500 direct jobs.

Read more here.

Sputnik V vaccine recommended for emergency use approval in India

The Subject Expert Committee of the Drugs Controller General of India (DCGI) has recommended the use of Russia’s Sputnik V Covid-19 vaccine in the country. Sputnik V will be the third vaccine to be used in India after Serum Institute’s Covishield (developed by Oxford-AstraZeneca) and Bharat Biotech’s Covaxin. Sputnik V, manufactured in India by Dr. Reddy’s Laboratories, has an efficacy rate of 91.6%.

Read more here.

Man Industries secures order worth Rs 766 crore

Man Industries (India) Limited has received an order worth Rs 766 crore from the domestic hydrocarbon sector. With this new order, the company’s total order book to be executed this year stands at approximately Rs 1,900 crore. Mumbai-based Man Industries is a leading manufacturer and exporter of large-diameter Carbon Steel Line Pipes used for various high-pressure transmission applications.

Read more here.

Coforge to acquire controlling stake in SLK Global Solutions

Coforge Limited has signed definitive agreements to acquire a controlling stake in Bengaluru-based SLK Global Solutions. This is part of the company’s efforts to strengthen its financial services vertical. Coforge will acquire an 80% stake in the business process transformation (BPT) enterprise over the next two years (in various tranches). The acquisition of the first 60% stake is for a cash consideration of Rs 918.3 crore. 

Read more here.

Passenger vehicle sales in India decline by over 2% in 2020-21: SIAM

According to a report by the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales in India declined by 2.24% YoY to 27.11 lakh units in the financial year 2020-21. The figure stood at 27.73 lakh units in the previous financial year. Total commercial vehicle sales declined 20.77% YoY to 5.68 lakh units in FY21. Two-wheeler sales fell by 13.19% YoY to 1.51 crore units during the same period.

Read more here.

JMC Projects receives new orders worth Rs 1,262 crore

JMC Projects (India) Limited has secured building projects in India worth Rs 1,059 crore. The company has also received a water project worth Rs 203 crore from the Maldives. Its total order wins for FY 2020-21 was around Rs 7,900 crore. JMC Projects is a civil engineering and EPC company. It is a subsidiary of Kalpataru Power Transmission Ltd.

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Praj Industries to set up ethanol plant for Godavari Biorefineries

Praj Industries Limited has secured an order from Godavari Biorefineries to set up a sugarcane syrup-based ethanol plant in Karnataka. Under the contract, Praj Industries will expand the existing ethanol manufacturing capacity of the plant to 600-kilo liter per day (KLPD), from the existing 400 KLPD, using sugarcane syrup. When commissioned, it will become India’s largest capacity syrup-based ethanol plant. 

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Solara Active Pharma’s board approves merger with Aurore Life Sciences

The Board of Directors of Solara Active Pharma Sciences Ltd has approved a merger with Hyderabad-based Aurore Life Sciences Pvt. Ltd with itself. After the merger, Solara will hold a 67% stake in Aurore Pharma Pvt., while promoter shareholding in Solara will increase from 42.57% to 55.15%. Solara’s board has also approved the merger of Empyrean Lifesciences and Hydra Active Pharma Sciences with itself.

Read more here.

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Editorial

The Truth behind No-Cost EMIs

When you purchase a product, you have two options for how you want to pay. Either you can pay the total amount upfront or you can pay in installments. We all love paying in installments, be it our loans and if given an option, even on our phones we buy from Amazon or Flipkart.

The process of paying in instalments is known to us as Equated Monthly Installments or EMI. This EMI will sometimes even carry some interest charges. But still many people find it interesting. This is because many of us don’t want to pay at one time. Sometimes we don’t have enough money or even we have, we want to allocate it to different things. 

And in the last few years, when we buy products online we see an option of Zero-Cost EMI or No-cost EMI. 

That means you don’t have to pay any interest even if you pay in instalments. If the product is worth Rs 30,000, you have to pay this amount only in 3,6 or even 9 months without any interest! But hey! Why are companies or retailers so generous? Do they really care so much about the customers that they are ready to cause trouble to their own books? We don’t think so. Why? Checkout below.

RBI’s notice on No-cost EMI (2013)

In 2013, The Reserve Bank of India (RBI) released a statement on the prevailing and rising use of the concept of zero percent interest. RBI clearly stated that no-cost EMI or zero cost EMI does not exist. Money always comes with a cost associated with it. 

In the zero percent EMI schemes offered on credit card outstandings, the interest element is often hidden and passed on to the customer in the form of processing fee. Since the very concept of zero percent interest is non-existent and fair practice demands that the processing charge be kept away, it is cheating the customer. 

This statement disregards the practice of zero-cost EMIs. It can only be offered to those people who offer absolutely no risk. But in the real world, every borrower or customer possesses a risk of default. 

The Normal Scenario

You will think that you are not paying any interest rate, but in reality, you are paying a hefty interest rate. Suppose that the retailer has to pay Rs 16,000 to the manufacturer of the handset. The extra Rs 4,000 it gets from the customers like you and me will be the retailer’s profits. The MRP of the smartphone is Rs 20,000 and the manufacturer requires Rs 16,000 from the retailer. From Rs 16,000-Rs 20,000, the retailer can sell the product at any cost. 

To increase their revenue, they can either increase the price of the smartphone or can sell a higher number of products. They cannot afford to sell at a higher price because the MRP is Rs 20,000. The only way to increase revenue is to generate higher sales. How can that be done? “No-Cost EMIs!”

Decoding No-Cost EMIs

Suppose you want to purchase a smartphone worth Rs 20,000 online. The first option is to pay Rs 20,000 at one go and get your handset. The second option is to buy the device at no-cost EMI of Rs 1,667 for next 12 months. This means that you have to pay Rs 1,667 every month for the next year. This adds up to Rs 20,004 (Rs 1,667 x 12). Obviously, the second option makes more sense. You don’t have to pay anything more and at the same time, you are saved from spending a large amount at one time. 

This is where banks enter into the frame. They tell retailers to offer their customers the option of no-cost EMIs. In return, banks will take half of the profit (as per the above example: Rs 2,000). If the retailers were able to sell 100 smartphones at the upfront cost of Rs 20,000, the no-cost EMI scheme will help them to drive the demand up. Now they will be selling 250 smartphones at the same Rs 20,000, thus, generating a revenue of Rs 50,00,000. Banks take Rs 5,00,000 as their share and retailers will have a profit of Rs 5,00,000.

Conclusion

As a customer, you are benefitting because you don’t have to pay the money upfront. The retailer is benefitting from higher revenue and profits due to increased sales. The banks are benefitting as they are getting their share. The smartphone manufacturer company is already receiving the amount they wanted for their handset. So, in all, no-cost EMIs are helping everyone. Then, what is the bad part about it?

The economy has to bear the brunt of this higher demand. This artificial increase in demand lures customers to buy products at the no-cost EMIs. As they have to pay less upfront, they buy more products. The retailers have the option to sell the device at a lower price but because they have to pay a share of their profit to the banks, they charge you more. 

In our example, the retailers could have sold the product at Rs 18,000 and still had Rs 2,000 profit. But to increase their sales, they take Rs 2,000 from your pockets and give it to the banks. So, indirectly, you are already paying 10% of the interest rate to the bank as per the example. 

In the short term, yes it is indeed beneficial for us! So we benefit from being able to buy expensive products in installments without any interest. Banks make profits by taking money from the seller. And sellers make more money because sales will increase!

But in the long term, prices of products will go up, and inflation will occur. Definitely not something good for the consumer, or for the economy. Let us just enjoy it while the fun lasts.

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Market News Top 10 News

L&T reports 45% YoY decline in net profit – Top Indian Market News

L&T reports 45% YoY decline in net profit

Larsen & Toubro (L&T) reported a 44.73% year-on-year (YoY) decline in consolidated net profit at Rs 1,410.29 crore, for the quarter ended September (Q2). The company’s revenue from operations has declined by 12.15% YoY to Rs 31,034.74 crore, during the same period. L&T’s Board of Directors has approved a special dividend of Rs 18 per share.

Read more here.

SBI signs $1 billion loan agreement with Japan Bank for International Cooperation

State Bank of India (SBI) has signed a loan agreement of $1 billion (~Rs 7,403 crore) with the Japan Bank of International Cooperation (JBIC). The loan will provide funds for manufacturers, suppliers, and dealers of Japanese automobiles in India. JBIC is a public financial institution and export credit agency, that promotes the overseas development of Japanese resources.

Read more here.

Axis Bank Q2 Results: Net Profit at Rs 1,682 crore

Axis Bank Limited has reported a net profit of Rs 1,682.67 crore, for the quarter ended September (Q2). The bank’s net interest income (NII) has increased by 20% YoY to Rs 7,326.07 crore, during the same period. NII is the difference between the interest earned by a bank on its loans, and the interest it pays to depositors.

Read more here.

Marico Q2 Results: 8% YoY rise in Net Profit

Marico Limited reported a 7.9% year-on-year (YoY) increase in consolidated net profit at Rs 273 crore, for the quarter ended September (Q2). The FMCG firm’s revenue from operations increased by 8.74% YoY to Rs 1,989 crore, during the same period. The company has stated that it had gained a strong growth in domestic sales in Q2.

Read more here.

Flipkart-Aditya Birla Fashion proposed deal violates FDI policy: CAIT

The Confederation of All India Traders (CAIT) has raised objections over the proposed deal between Aditya Birla Fashion & Retail and Flipkart. CAIT has alleged that the deal violates the Government’s foreign direct investment (FDI) policy. According to the deal, Aditya Birla Fashion has plans to raise Rs 1,500 crore by issuing a 7.8% stake to Walmart-owned Flipkart Group.

Read more here.

Tata Elxsi secures global services deal from Aesculap AG

Tata Elxsi has been selected as the global engineering services partner by Aesculap AG. It has opened a dedicated Global Engineering Center (GEC) for Aesculap AG, as part of its strategic multi-year engagement. Aesculap AG is owned by Germany-based B. Braun, one of the world’s leading manufacturers of medical devices. 

Read more here.

Piramal Enterprises Q2 Results: 14% YoY increase in net profit

Piramal Enterprises Limited reported a 13.95% year-on-year (YoY) increase in consolidated net profit at Rs 628.31 crore, for the quarter ended September (Q2). The company’s consolidated revenue from operations stood at Rs 3,301.84 crore, during the same period. The company has stated that these results have been achieved through strong sales in the pharma segment.

Read more here.

TCS selected as strategic partner for Belgium-based AG

Tata Consultancy Services (TCS), on Wednesday, announced that it has been selected as a strategic partner by Belgium-based insurance company, AG. TCS would help to improve AG’s digital channels and modernize its IT systems. The global Innovation ecosystem and experience of TCS will be used to upgrade AG’s insurance services.

Read more here.

Titan reports 38% YoY decline in net profit to Rs 199 crore

Titan Company Ltd. has reported a 37.8% year-on-year (YoY) decline in standalone net profit to Rs 199 crore, for the quarter ended September (Q2). The watch and jewellery maker has posted a 1.72% YoY decline in total income at Rs 4,389 crore, during the same period. The share price of Titan saw a fall of 1.12%, and closed at Rs 1,218 on the NSE today.

Read more here.

RBL Bank Q2 Results: Profit rises 165% YoY to Rs 144 crore

RBL Bank Limited reported a 165% year-on-year (YoY) increase in net profit to Rs 144.2 crore, for the quarter ended September (Q2). The bank’s net interest income (NII) increased by 7.3% YoY to Rs 932.1 crore, during the same period. The share price of RBL Bank saw a rise of 2.48%, and closed at Rs 179.50 on the NSE today.

Read more here.

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Flipkart – Aditya Birla Fashion Deal. Future of Indian Retail Getting Re-written?

About Aditya Birla Fashion & Retail Limited 

Mumbai-headquartered Aditya Birla Fashion & Retail Limited (ABFRL) is an Indian clothing retail chain. ABFRL emerged after the consolidation of two businesses in 2005. These two businesses were Pantaloons Fashion and Retail (PFRL) and Madura Fashion & Lifestyle (MFL).

The company has 3,000+ brand stores and 25,000 multi-brand outlets all over the country. They span around a retail space of 8.1 million sq.ft. Big apparel names like Allen Solly, Louis Philipe, Peter England, Forever 21, Pantaloons, Ted Baker, Ralph Lauren, and Van Heusen are part of ABFRL’s brands. These are some of the most desirable brands for upper-middle-class families in our country!

Source: ABFRL’s Quarter Report

Based on Market Capitalization, ABFRL is the leading company Retail sector (Industry: Textiles-Products) with a market cap of Rs 13,720.05 crore. It is well ahead of its listed competitors Future Lifestyle Fashion Limited and Shoppers Stop.

Focussing on the deal

Aditya Birla Fashion & Retail Limited announced on Friday that the company is raising Rs 1,500 crore from Flipkart Group. Walmart-owned Flipkart will buy a 7.8% stake in Aditya Birla Fashion for Rs 1,500 crore at Rs 205 per share. The promoters will be left with a 55.13% stake in the company after the completion of the issuance, which is a respectable number.

The rumours of Flipkart buying a minority stake in the retail company started surfacing earlier. On Friday morning, the company’s board approved the issuance of equity shares on a preferential basis to Flipkart Investments Private Limited. You can refer to the press release from ABFRL here. This news was taken positively by the market participants. ABFRL’s share price rose by 7.59% to close at Rs 165.05. The stock hit an intraday high of Rs 178.80.

Aditya Birla Fashion & Retail plans to invest this capital to strengthen its balance sheet and accelerate its growth in the apparel segment. This deal reflects how well the apparel industry of the country is expected to do in the near future.

According to Kumar Mangalam Birla, Chairman of Aditya Birla Group, the apparel industry in India will touch $100bn in the next 5 years. With the rise in disposable income of the middle class, people are aspiring to wear clothes from famous brands. Companies in the sector are also following different digital transformation strategies. They believe that the future would comprise both online and offline sales. Thus, the company needs to transform digitally as well.

Covid-19 slowing the business

The business of manufacturing and retailing of branded apparel suffered massively during the lockdown. Aditya Birla Fashion & Retail reported a revenue of Rs 323 crore in Q1FY20. This was 85% below of Rs 2,065 crore they reported in the same quarter the previous year. The company reported a net loss of Rs 410 crore as compared to Rs 21 crore profits they declared in June 2019. Due to poor earnings, their EPS also dropped into negative.

Even though the company reported disappointing first-quarter results, they are expected to bounce back in Q3. As the lockdowns are getting eased, people are returning to the shops as they start to return to offices. Also, Diwali, Navaratri, and Dussehra are just around the corner. The company is optimistic about its sales during this festive season. This cash infusion will help ABFRL revive its business post Covid-19.

A win for both the parties?

Flipkart will benefit from this deal by strengthening the range of brands offered on its e-commerce platforms. It acquired Myntra in 2014 in a deal valued at Rs 2,000 crore. Getting international and domestic brands associated with ABFRL on its platforms will attract more customers to the company. Also, they are getting this deal at Rs 205 per share. This is at a discount as ABFRL was trading above Rs 250 during February 2020. Due to the COVID-19, the company’s share tumbled to Rs 102 in May.

But yes, compared to Flipkart is paying more than the current market price of the stock. So what is the catch? It is that Flipkart gets pre-emptive rights, or the right to buy additional shares from ABFRL before the general public for a period of 1-5 years. That means there is a chance of Flipkart increasing their stake in the future.

Kalyan Krishnamurthy, CEO, Flipkart Group said: “Through this transaction with ABFRL, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country.”

Covid has forced the ABFRL to relook at their business. Engaging with e-commerce platforms will make them less vulnerable during these times and also help them save rental or other asset-heavy costs. Rather than fighting against the growing prominence of online retail, the decision to collaborate with them makes more sense.

The coming together of two large fashion houses will help them to make use of synergies in manufacturing and supply chain. It will help them to get more customers to derive more sales. Due to synergies in business, the cost of operations will also decrease. Thus, boosting both, the profits and revenue in the long run. According to market analysts, this deal will aid ABFRL to receive the most favoured status on Flipkart’s website.

Hopefully, the brands will refrain from offering their premium products at huge discounts, as Flipkart is notoriously known for doing this. This will decrease the ‘premium’ appeal of the brands of Aditya Birla Fashion like Van Heusen and Louis Philippe.

This new deal does give birth to positive sentiments about the apparel industry but to what extent Flipkart will be able to help ABFRL recover their lost business will be a thing to watch. Either way, ABFRL will surely appreciate this new capital along with the possibility of improved sales. Flipkart is also seeking to brand itself as “India’s Fashion Capital” and ABFRL will help them tackle the premium clients.

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Editorial Market News

Flipkart takes over Walmart India, announces Flipkart Wholesale

Flipkart on Thursday announced the acquisition of Walmart’s Indian operations. We try to analyse what led up to this moment.

About Flipkart

Flipkart is an Indian e-commerce company founded by Sachin Bansal and Binny Bansal (no relation) in 2007. They started off by selling books online, just like Amazon did in the mid-90’s. The company quickly scaled from its humble beginnings and added electronics, home-essentials, lifestyle products and fashion to its list of products. American multinational company Walmart holds an 81% stake in the company as of 2020.

Today, Flipkart has grown into a brand quite close to the heart of every urban and semi-urban citizen. They offer a wide range of services that go beyond the line of a traditional online shopping website. Through multiple acquisitions, Flipkart has made their presence felt in the everyday lives of Indian consumers.

Out of the many subsidiaries of the company, these are the notable ones

  • Myntra.com, acquired in 2014
  • PhonePe, acquired in 2016
  • Ekart Logistics

Walmart Deal

On May 8 2018, Walmart publicly announced it had signed agreements to become the largest stakeholder in Flipkart. The deal worth $16 billion saw the US retail giant picking up a 77% stake in the Indian company. This stake was quickly raised to 81.28% within just a few months of the landmark deal. In July 14 2020, Flipkart raised a further $1.2 billion from Walmart by issuing fresh equity shares. Valuations stood close to $25 billion.

Why India?

India has been one of the fastest growing countries in the world, and with growth comes an increase in wealth. As the middle-class family in India got richer, their disposable income increased. Higher disposable income among the relatively young population of the country led to a quick increase in spending. E-commerce services began to be major facilitators of these higher spending habits, and soon Flipkart and rival Amazon(launched Indian operations in 2012) began to be recognized as household brands across the country.

Walmart’s entry into the Indian e-commerce segment was a direct result of pressure from Amazon’s growing influence in growing markets around the world. It was seen as a shift of playing field for these huge companies from the US to India. “While Walmart and Flipkart will leverage the combined strengths of both companies, they will maintain distinct brands and operating structures”, Walmart had said in its initial press release. But a lot has changed in the last 2 years.

New Developments

Flipkart has acquired a 100% controlling interest in Walmart India for an undisclosed amount, further intensifying the retail war in India. Walmart currently runs 28 Best Price wholesale stores across India. The company also announced ‘Flipkart Wholesale’, a B2B(business-to-business) service to be launched in August. The marketplace would aim to link manufacturers and sellers to micro, small and medium enterprises (MSMEs).

“The B2B market for finished goods is estimated to be worth USD 650 billion. To start with, we will be focusing on USD 140 billion of that USD 650 billion, which is largely the categories of fashion, grocery, general merchandise, large and small electronics,” Flipkart Senior Vice President and Head – Flipkart Wholesale Adarsh Menon told PTI.

Major rival Amazon has its own B2B service, established to serve the same purpose. Amazon had shown interest earlier in purchasing Future Retail’s business, to further its hopes of becoming market leader, dethroning Flipkart. The deal is said to have been closed with controlling interests of Future Retail to go into Mukesh Ambani’s hands. Reliance, earlier this month, had announced JioMart in its AGM. DMart, the retail and B2B major from India, posting a huge drop in revenue last quarter is a signal of the tightening margins in the industry.

Walmart-owned Flipkart has picked up about 27% stake in Arvind Fashions NSE 2.41 % Ltd’s subsidiary Arvind Youth Brands for Rs 260 crore, according to sources and a regulatory filing by the denim maker, as the homegrown ecommerce company looks to strengthen its mid-market fashion portfolio.

Flipkart picked up 27% stake in Arvind Fashions Limited’s subsidiary Arvind Youth Brands for Rs 260 crore, earlier this month. The subsidiary will own the Flying Machine brand, which has been retailing on Flipkart and its platforms for over six years. Flipkart is surely setting all its coins in place to prepare for the upcoming retail war.

Recently, news also came out that Amazon is eyeing a 9.99% strategic stake in Reliance Retail. Amazon, the world’s richest company, is certainly taking India as a primary focus going forward and these talks signify that. 

In Conclusion

With seemingly unlimited money being thrown from both Amazon and Walmart into India, small scale retailers face ever growing pressure to fall into line, or to go out of business. The B2B segment, in which both US conglomerates currently have their targets on, may also see high growth rates in the coming years. India, being a market with huge untapped economic potential, may also see the retail segment flourish in coming years.

Pressure on multinational companies(MNCs) to go hyper-local, may also see an increase in jobs being generated in various sectors around the country. As a responsible citizen, I personally do hope that clear rules and regulations are set and enforced by the government to protect our markets and its consumers