Walmart chief financial officer Brett Biggs said it anticipated regulatory changes in India but was disappointed it happened so quickly, referring to the foreign direct investment (FDI) norms in ecommerce that changed last month.
“We will have legislation changes, we know that and you work your way through it. It is disappointing that you have a law like that changed that quickly, but we have made the adjustments and we are moving forward,” said Briggs at Raymond James Institutional Investors Broker conference call. “When you make investment in India, note things are going to change. We knew that going into an investment and you have just got to work their way through.”
Last month, the government tightened norms prohibiting marketplaces selling products from affiliates and stipulating that such entities cannot exercise ownership or control over inventory. Ecommerce firms including Walmart-owned Flipkart and Amazon were also asked to provide services such as warehousing, logistics and advertising to all sellers in a fair manner. It barred ecommerce companies from entering into pacts for the exclusive sale of products as well.
The world’s biggest retailer, acquired Flipkart last May for over $16 billion, drawn by India’s vast consumer base. “It is an interesting market and the reasons we decided to make the Flipkart investment and also there is still 1.3 billion people in India. There is still a growing middle-class. E-commerce penetration is getting bigger in a very rapid fashion,” added Briggs adding that he was part of the original joint venture in India.
Walmart entered India in 2008 by setting up a joint venture with Bharti Enterprises, an Indian conglomerate, to open wholesale stores. However, the alliance turned rocky after the US company focused its attention on an internal probe to check if the unit had in any way violated US anti-bribery laws. In 2013, Walmart acquired Bharti’s stake in the wholesale unit to go solo.
A recent Morgan Stanley report said it had built in revenues of $8 billion for FY20 from Flipkart in Walmart’s consolidated numbers which implied a GMV of $13 billion but following the regulatory changes, there would be two-fold impact on revenues.
“Potential slowdown in overall growth of gross merchandise value or revenues and corresponding impact on losses due to rising operating costs and contribution of first-party relationship coming down, which will have an impact on reported revenues but no material impact on profitability or losses,” the report added.
The financial services firm also revised its estimate for the Indian ecommerce sector, expecting it to now clock $200 billion in sales by 2027, from its initial forecast of 2026.
Leave a Reply