Walmart in advanced talks to invest $1Bn in Flipkart to take on Amazon

Walmart Stores is in advanced discussions to invest as much as $1 billion into India's Flipkart Online Services Pvt, as the two companies battle Amazon.com in e-commerce, according to a person familiar with the matter.

Walmart, the world's largest retailer, would take a minority stake in Flipkart under the proposed agreement, the person said, asking not to be identified because the matter is private. Final terms of the deal have not been worked out and negotiations are still underway, the person said. Flipkart's most recent valuation was about $16 billion, according to research firm CB Insights.

Flipkart is the largest online retailer in India, but its lead has been under assault as Amazon steps up investments in the country. CEO Jeff Bezos said in June he plans to spend another $3 billion in India to gain customers in the fast-growing market.

A deal with Walmart would give Flipkart additional capital to fight back and more expertise in battling the e-commerce pioneer. "If the deal goes through, the competitive intensity between Flipkart and Amazon will shoot up," said Gautam Chhaochharia, the Mumbai-based head of India research at UBS AG.

The deal has potential benefits for Walmart too. Beyond any eventual financial return on its investment, Walmart would gain exposure to India's expanding e-commerce market and have the opportunity to challenge Amazon on more equal footing than the US.

A spokeswoman for Walmart said she could not immediately provide comment. A Flipkart spokesman said, "It is our policy not to comment on rumours or speculations."

India is the next big potential retail prize after the US and China, where foreign players have made little progress against Alibaba Group Holding Ltd. India's online market will expand at an average of 45% annually in the next four years and reach $28 billion by 2020, according to estimates from Kotak Institutional Equities.