Investors may force Walmart to bring Flipkart IPO within next four years

Walmart Inc, the world’s largest retailer, could be forced to publicly list its newly acquired Indian e-commerce company, Flipkart Group, within four years at the request of a small minority of Flipkart shareholders, a public filing shows.

Walmart’s $16 billion purchase this week of India’s biggest online seller gave the Arkansas-based retailer a 77 percent stake in Flipkart and a foothold in a country with 1.3 billion people and one of the world’s fastest growing economies. That the purchase for India’s most valuable startup gave Walmart a leg up over its chief rival, Inc, which has been investing heavily in India, only sweetened the deal.

But whatever euphoria existed among Walmart executives for striking the most expensive purchase in the company’s history could be short-lived. The deal’s terms give investors controlling as little as 14 percent of Flipkart’s shares the right to require Walmart to take the Indian company public in as soon as four years, according to the filing.

The investors could demand that Flipkart’s valuation through an initial public offering be no less than the roughly $20.8 billion the company commanded when Walmart purchased a 77 percent stake.

"While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future," Bentonville, Arkansas-based Walmart said Wednesday, before details of the arrangements were disclosed in the filing late Friday.

The company’s stake in Flipkart could fall below 77 percent well before a potential IPO, Walmart said, requiring a greater share of other investors to agree to a public listing. Randy Hargrove, a Walmart spokesman, declined to comment on Saturday beyond the company’s recent statements and filings.

Reuters first reported on the IPO clause.