Walmart in talks for $25 billion investment in Tata’s ‘super app’

Walmart is in talks with Tata Group for an investment of up to $25 billion in the Indian conglomerate’s planned ‘super app’, people familiar with the matter said.

The app, scheduled to be launched in India in December or January, will tie in all of Tata’s consumer businesses, including healthcare, grocery, insurance, fashion and electronics, the sources said.

Walmart has hired Goldman Sachs as the banker for the proposed deal that could be run as a joint venture managed by Tata and include offerings from Walmart’s Flipkart, the paper said.

“Walmart is keen to get a strong brand backing its e-commerce business, while Tata group wants a global name and an established player in the online space to be able to compete against Reliance Industries’ Jio Platforms and Amazon,” a source said

A news agency reported that the Tata Group, whose listed companies have a combined market value of $160 billion, is in discussions with potential investors about stakes in its digital platform.

Walmart did not respond to a Reuters request for comment, while Tata and Goldman declined to comment.

Shares of Tata Group flagship Tata Consultancy Services climbed 2.6% on Tuesday, while Tata Steel gained nearly 1% in a flat overall market.

If the deal goes through, it could mark Walmart’s biggest investment in the country, topping the $16 billion the US-based retailer paid for a 66% stake in ecommerce company Flipkart.

Walmart, Amazon and Reliance Industries, controlled by Mukesh Ambani, have all made bold bets on India’s booming e-commerce market, which Goldman Sachs has estimated to be worth $99 billion by 2024.

They have targeted a growing population of tech-savvy shoppers, luring them with discounts, free returns and easy exchanges.

“Tata already has a good reputation for its products and Walmart’s advanced technology and experience in the space will help with better distribution,” said Rajiv Frank, marketing and brand consultant at New Delhi-based Brandtrotter.

“There are still a lot of people in small-town India who don’t fully trust Amazon. Tata’s name will help (Walmart) with the trust factor.”

Meanwhile, Walmart has picked the founders of petrol station operator EG Group and private equity firm TDR Capital as the preferred bidder for British supermarket chain Asda at a valuation of more than 6.5 billion pounds ($8.4 billion), according to a person familiar with the matter.

Having had its attempt to sell Asda to UK rival Sainsbury’s for 7.3 billion pounds thwarted by Britain’s competition regulator last year, Walmart said in July that it had resumed talks with potential buyers of a majority stake.

A consortium led by Mohsin and Zuber Issa, the billionaire brothers who founded EG Group nearly two decades ago, and TDR buying Asda would bring it back under British ownership for the first time since 1999, when Walmart paid 6.7 billion pounds for the business.

However, a deal has not yet been finalised, the person said, requesting anonymity as the talks are private.

The Issa brothers and TDR have been competing with U.S. PE firm Apollo Global Management for Asda, people familiar with the matter have said.

TDR, EG Group, Asda and Walmart declined to comment. Apollo did not respond to a request for comment, while the Issa brothers could not be reached for comment.

The drop in Asda’s valuation from the proposed Sainsbury’s deal is likely to be because of the integration benefits that a merged Sainsbury’s and Asda would have delivered.

While Asda’s sales have increased during the COVID-19 pandemic, the chain has still lagged Sainsbury’s, Morrisons and market leader Tesco.

Asda this month announced a deal with EG Group to develop “Asda on the Move” branded convenience stores on EG petrol forecourts.

Sky News, which first reported on the front-runners for Asda’s acquisition, said the Issa brothers and TDR wanted to retain Asda CEO Roger Burnley.

Separately, private equity firm KKR & Co will invest $755 million in the retail unit of Reliance Industries, the Indian conglomerate saidlast week, bringing the total funding in Reliance Retail to $1.78 billion within a month.

Reliance Industries is lining up investors in its retail unit after the conglomerate raised just over $20 billion this year from global investors, including Facebook, by selling stakes in its Jio Platforms digital business. The Mumbai-headquartered Reliance has approached investors in Jio Platforms about buying stakes in its retail arm, Reuters had reported.

Reuters