Sample Reading Comprehension - 4 | Course for UPPSC Preparation - UPPSC (UP) PDF Download

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Business news does not repeat itself but it sometimes rhymes. In 2007 Walmart, America’s biggest grocer, crowed that it would crack the coveted Indian market by being the first global retailer to set up shop there, pipping envious rivals in the process. On May 9th it announced much the same thing: its time in India has come, this time by virtue of paying $16bn for a majority stake in Flipkart, India’s largest ecommerce outfit, which had also been coveted by its vast online rival, Amazon. The sense of déjà vu owes to the fact that its original foray proved a disappointment. Walmart’s hopes of somehow circumventing rules to protect local shopkeepers, which have long prevented most foreign retailers from opening stores, have been repeatedly dashed. A decade on it has a meagre 21 wholesale stores in India, generating just 0.1% of its $500bn in global revenues and a small loss to boot. Somehow that has not dissuaded the beast of Bentonville from undertaking the biggest foreign acquisition in Indian history.
The Indian e-commerce market is as different from America’s brick-and-mortar retail landscape as Walmart’s Arkansas home is from Bangalore. Walmart probably has too many stores in its mature home market. Flipkart operates online and in quasi-virgin commercial territory: 95% of Americans shop at Walmart at least once a year, but only 5-10% of Indians have ever bought anything online. The deal is a departure in other ways, too. Walmart has already swooped on companies it thinks will help it grow its ecommerce presence. In 2016 it paid out $3bn for Jet.com, a putative rival to Amazon in America; it has also bagged Bonobos, a purveyor of tailored trousers. But Flipkart, which was founded in 2007 by two former Amazon employees, is in a different league in terms of price tag.
Walmart will own around 77% of the company, which is valued at over $20bn in total. Even for Walmart, that is a lot of money: $20bn is roughly the cash it generates every year net of capital expenditure, say, or 8% of its market capitalisation. Connoisseurs of the Indian tech scene have raised eyebrows at the price tag, given that Flipkart raised money at a valuation of under $12bn just a year ago. SoftBank, a Japanese telecoms and internet giant which became its biggest shareholder after investing $2.5bn just nine months ago, stands to walk away with $4bn. Walmart’s new acquisition will not produce quick returns. Analysts reckon Flipkart loses money on each shipment. Margins are unlikely to improve soon given Amazon’s incursion into the market (having committed $5bn to India, it probably ranks a close second to Flipkart, which is thought to account for just under half of India’s online sales). Paytm Mall, a newish rival backed by Alibaba of China, is also ambitious.