Retail giant Walmart may Depart Flipkart after India’s new Foreign Direct Investment (FDI) Standards for e-commerce Businesses came into force, US investment banker Morgan Stanley has Cautioned.
According to the report, Walmart-Flipkart saga might turn out to similar to what occurred with Amazon in China in late 2017.
“An departure is probably, not entirely out of the issue, with the Indian e-commerce market getting more complex,” the report by Morgan Stanley said late Monday.
“We estimate that Flipkart derives 50 percent of its revenue from this group, meaning Flipkart could face significant disruption and top-line stress in the near term,” it added.
The brand new FDI principles may require Flipkart to remove as much as 25 percent products out of the stage including smartphones and electronic equipment that constitute a majority of earnings, said Morgan Stanley.
About February 1, disruption was caused from the e-commerce operations in India of the two businesses after the new FDI norms for the e-commerce industry came in to effect.
The standard prohibited the internet retailers out of mandating any company to sell their products entirely on its platform.
In the new policy, the Commerce Ministry also noticed that the online retail firms would not directly or indirectly influence sale price of goods and services and would maintain a level playing field.
Amazon India needed to draw a lot of its products and they had been recorded as”currently unavailable” since the new norms prohibit the e-retailers from promoting products of organizations in which they’ve stakes.
Both companies have collectively lost market capitalisation of $50 billion (roughly Rs. 3,60,000 crores).
Amazon lost market capitalisation of over $45 billion on Nasdaq while Walmart dropped more than $5 billion on the NYSE.