How Walmart is on its way to become the biggest MNC in India

On May 9, US retailer Walmart Inc acquired a 77 per cent stake in Flipkart for about $16 billion. With this, the world’s largest company by revenue, the $486-billion Walmart, is well on its course to become the biggest MNC operating in India, with annual business of over $10 billion.

The firm’s global CEO, Doug McMillon, arrived in Delhi late on May 8 to sign on the Flipkart deal.

While little is known about Walmart’s India operations, apart from its $-500 million wholesale cash and carry business Best Price, the numbers suggest it is likely to become India’s biggest MNC by a clear margin.

For instance, Walmart Inc. already sources nearly $3 billion worth of goods for its international stores from Indian firms. Over and above that, it also has another $3 billion worth of pharma (mostly generics) sourcing from India.

Thus, at Rs 67.25 to a dollar, Walmart already does business worth Rs 43,700-odd crore from India. With Flipkart-Myntra-eBay-Jabong revenues of Rs 22,911 crore in fiscal 2016-17, this adds up to nearly Rs 67,000 crore.

That’s well past the second largest MNC operating in India, Rosneft’s Essar Oil (Rs 63,722 crore in 2016-17), and just short of the biggest – MNC Maruti Suzuki India’s Rs 70,418 crore.

This equation, however, may change when the final numbers for fiscal 2017-18 are compiled. Maruti has already declared its total income at Rs 79,600 crore for the fiscal. While Walmart India’s wholesale business is growing at 15-16 per cent per annum, Walmart’s sourcing from India is growing at 8-9 per cent per annum.

But Flipkart is projected to close fiscal 2017-18 at $4.6 billion (Rs 30,935 crore), nearly 50 per cent higher than the previous year. Myntra-Jabong business also grew around 40 per cent- 50 per cent. At these rates of growth, the combined Walmart-Flipkart business is likely to match or surpass Maruti’s revenue in 2017-18.

This development has come in a mere matter of a decade.

Walmart India opened its first wholesale store in 2009, though it had set up its sourcing office in India around four years earlier, in 2005-06. It has since already established 21 cash and carry stores under the Best Price brand, while around seven more are being added this year. It has targeted 50 stores in the next three-four years, with 15 stores to be built next year alone.

Each store built on nearly four acres of land has 50,000 sqft of shopping area. Its domestic business is growing at a CAGR of 15-16 per cent per annum. Best Price stores source 97 per cent of products sold from Indian suppliers.

Its sourcing business procures goods worth $3 billion from India, largely comprising textiles, handicrafts, apparel and home furnishings. The $3-billion pharma sourcing is mostly generic drugs sourced by Walmart’s UK arm, to be supplied to the retail giant’s stores across global markets.

India is the world’s largest supplier of generic medicines by volume. Walmart Pharmacy is America’s fifth largest pharmacy chain with annual prescription revenue topping $20.5 billion in 2017. It accounts for 5 per cent of America’s prescription sales.

But this rate of success for Walmart is not unique to India alone.

The 55-year-old Walmart Inc has already grown into a behemoth, whose size often inspires awe. It has 22 lakh employees, which makes it the world’s biggest employer after US defence services and the Chinese People’s Liberation Army.

Walmart is already the world’s largest retailer, operating more than 11,700 stores under 65 brands in 28 countries. If Walmart was a country, its sheer size would make it the world’s 28th largest by GDP – ahead of Pakistan, Bangladesh or Sri Lanka.

The Walton family that founded Walmart still owns nearly 50 per cent of the company’s equity, making them one of the world’s richest families.

(A version of this piece appeared in Business Today.)

Also read: Why Walmart needs Flipkart in its e-tail race in India