1 DeborahWeinswig,CEOandFounder,CoresightResearchdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

May 10, 2018

Walmart to Invest $16 Billion to Acquire a 77% Stake in India’s Flipkart

1) OnMay9,Walmartannouncedthesigningofadefinitiveagreementtoinvest$16billionfora77%stakeinFlipkart,aleadingonlineretailerinIndia.ThecompanysaiditsupportsFlipkart’sambitiontobecomeapubliclylistedsubsidiaryinthefuture.

2) Walmartbelievestheacquisitionwillcreatesignificantlong-termvalueforshareholdersthroughenteringacriticalgrowthmarket,acquiringaleaderine-commerce,acquiringlocaltalentwithglobalexpertiseandachievinglong-termgrowth.

3) Theinvestmentincludes$2billionofnewequityfunding,supportedbynewlyissueddebtandcashonhand.ThecompanyexpectstheinvestmenttoreduceFY19EPSby$0.25–$0.30andFY20EPSby$0.20,assumingacloseinthesecondquarterofthisfiscalyear.

WalmarttoInvest$16Billionfora77%StakeinIndia‘sFlipkartOnMay9,Walmartannouncedthesigningofadefinitiveagreementtoinvest$16billionfora77%stakeinFlipkart,aleadinge-commerceplayerinIndia.ThecompanysaiditsupportedFlipkart’sambitiontobecomeapubliclylistedsubsidiaryinthefuture.

WalmartcommentedthatIndiaisoneofthemostattractiveretailmarketsintheworld,duetoitssizeandgrowthrate,andtheinvestmentisanopportunitytopartnerwiththecompanythatisleadingthetransformationofe-commerceinIndia.

Theinvestmentincludes$2billionofnewequityfunding,supportedbynewlyissueddebtandcashonhand.ThecompanyestimatestheinvestmentwillreduceFY19EPSby$0.25–$0.30andFY20EPSby$0.20,assumingacloseinthesecondquarterofthisfiscalyear.

2 DeborahWeinswig,CEOandFounder,CoresightResearchdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

May 10, 2018

RationalefortheTransactionThecompanybeganitspresentationwithitsslogan,“Wesavepeoplemoneysotheycanlivebetter.”

Keypointsfromthediscussionfollow.

FlipkartFitsWithinWalmart’sInternationalStrategy• TheFlipkartinvestmentrepresentsahigh-growth,attractivemarketopportunity

withthelocalleader.

• IndiaisoneofthekeygrowthmarketsinwhichWalmartwantstopracticeactiveportfoliomanagement.

• OtherpointsincludeWalmart’spledgetocreatedisciplinedgrowththroughadifferentiatedcustomerproposition,tobethelowest-costoperatorandtobuildstrongfoundations.

FlipkartTransformsWalmart’sE-CommerceOpportunityinaCriticalGrowthMarket

TheIndiamarket:• Isanattractiveopportunityinoneofthefastest-growingmarkets.

• E-commerceisgrowingfourtimesasfastastheretailindustry.

Flipkart:• Isthelocalleader,with$7.5billionofannualgrossmerchandisevalue(GMV),which

isthetotalvalueofgoodssoldthroughthesites,and54millionactivecustomers.

• Hasanexperiencedandcommittedmanagementteam,withstrongin-countryexperience.

• HasstrongshareholderpartnersandasuccessfultrackrecordofinvestmentsinAsia.

• Createslong-termvalueforshareholders,associates,communitiesandtheIndianeconomy.

IndiaIsaCompellingMarketwithLong-TermPotential• India’sGDPhasgrownata9.4%compoundannualgrowthrate(CAGR)overthepast

10years.

• Thecountryhas443millionmillennials,plus393millionGenerationZers,comprising66%ofthepopulation.

• 35%ofthepopulationusestheInternet,makingIndiathesecond-largestInternetmarketglobally.

• ThemobilepercentageofInternettrafficis79%,versus50%globally.

• Smartphonepenetrationisestimatedtohit58%in2020,versus30%in2017.

IndiaE-CommerceIsProjectedtoGrowFourTimesasFastasTotalRetailOvertheNextFiveYearsTotalIndiaretailisprojectedtogrowat9%overthenextfiveyears,comparedto36%fore-commerce.

ThefollowinggraphshowstheexpectedaccelerationinIndiane-commerce.

3 DeborahWeinswig,CEOandFounder,CoresightResearchdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

May 10, 2018

Figure1.IndiaE-CommercePenetration(ExcludingServices)

Source:Bain&Co.

FlipkartIstheLocalLeaderinIndiaE-CommerceThefollowinggraphicshowsascreenshotofFlipkart’sapp,outlinestheflagshipFlipkartbusinessesandillustratesFlipkart’secosystem.

Source:Walmart

FlipkartIsPositionedforSignificantGrowthThegraphbelowshowsFlipkart’sGMVandthenumberofactivecustomers,andthesidebarshowsthenumberofunitssoldinFY18.

0.2% 0.3% 0.4%1.0%

1.8% 1.8% 2.1%

6.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY23E

4 DeborahWeinswig,CEOandFounder,CoresightResearchdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

May 10, 2018

Note1:GrossMerchandiseValue(GMV),asdefinedbyFlipkartrepresentsthetotaldollarvalueofordersprocessedonitsmarketplacesintheperiodwithoutreductionforreturns.Note2:Activecustomersarecustomerstransactingatleastonceinthelast12months.Totaldoesnotexcludecustomeroverlapbetweenentities.Source:Walmart

FlipkartMaintainsaLeadingPositioninFast-GrowingCategoriesThefollowinggraphicranksFlipkart’spositionbyGMVshare.

Source:WallStreetanalystsandBain&Companyestimates.

WalmartIsWorkingwithStrongShareholderPartnersKeystrategicandshareholderpartnersincludethefollowingleadingcompanies:

Source:Walmart

GrossMerchandiseValue(USDMil.)

ActiveCustomers(Mil.)

5 DeborahWeinswig,CEOandFounder,CoresightResearchdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

May 10, 2018

DetailsfromtheTransaction

TransactionStructure• Walmart’sinvestmentofapproximately$16billion,including$2billionofnew

equityfunding,whichwillhelpFlipkartachieveitsgrowthpotential.

• Walmart’sinitialownershipstakeisapproximately77%.

• TheremainingshareswillbeheldbyFlipkart’sexistingshareholders,includingCofounderBinnyBansal,TencentHoldings,TigerGlobalManagementandMicrosoft.

• WalmartsupportsFlipkart’sambitiontotransitionintoapubliclylisted,majority-ownedsubsidiaryinthefuture.

• TheclosingisexpectedlaterinFY19,subjecttoregulatoryapproval.

FinancialImpact• Theinvestmentwillbefundedbyacombinationofnewlyissueddebtandcashon

hand.

• FlipkartwillbereportedaspartofWalmart’sInternationalsegment.

• Iftheacquisitionclosesattheendofthefiscalsecondquarter,FY19EPSwillbereducedby$0.25–$0.30andFY20EPSby$0.20.

• Inthemidtolongterm,asthebusinessscalesandefficienciesarerealized,Walmartexpectslossestodeclineandreturnstoimprove.

• Walmartanticipatesthecontinuationofitscurrentsharebuybackprogram,whilemaintainingitsstrongcreditprofile.

TheTransactionIsExpectedtoCreateSignificantLong-TermValueforShareholdersWalmartseesvaluein:

• Enteringacriticalgrowthmarket.

• Acquiringaleaderine-commerce.

• Acquiringlocaltalentwithglobalexpertise.

• Achievinglong-termgrowth.

6 DeborahWeinswig,CEOandFounder,CoresightResearchdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

May 10, 2018

DeborahWeinswig,CPACEOandFounderCoresightResearchNewYork:917.655.6790 HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnHarmon,CFASeniorAnalystHongKong:6/F,LiFungTower888CheungShaWanRoad,KowloonHongKongLondon:242–246MaryleboneRoadLondon,NW16JQUnitedKingdomNewYork:1359Broadway,18thFloorNewYork,NY10018

Coresight.com