India's largest e-commerce player Flipkart needs Walmart to contend with Amazon's “incredible patience and lots of capital”, said Aswath Damodaran, professor of finance at NYU Stern School of Business.
An acquisition by Walmart will give the Indian unicorn a “second life”, he told BloombergQuint in an interview. “Head to head, Flipkart has no chance to get Amazon. Over time, Amazon would have outlasted them.”
Walmart is in discussions to spend about $7 billion to become the largest investor in Flipkart which has been burning cash at a rapid rate as it seeks to keep up with the Jeff Bezos-led e-commerce giant which made an entry into India in 2012. Besides, Amazon is considering putting in a rival bid, Livemint reported.
The outcome of the race for Flipkart will decide who will dominate the e-commerce market the India, poised to become the world's third largest after the U.S. and China. India's online market is slated to reach $28 billion by 2020, according Kotak Institutional Equities.
A Walmart-led Flipkart will be valued at a premium because as expectations of a stake sale build up, Damodaran — one of the leading voices on financial valuation — said. This will also be the best route for Walmart to enter India's market.
I will make a prediction that the premium will be larger in a more regulated space of the market because you are buying a local player which already has it figured out.Aswath Damodaran, Professor-Finance, NYU Stern School of Business
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