Walmart says it was prepared to face regulatory changes when acquired Flipkart

Walmart, which acquired 77% stake in Flipkart for $16 billion last year, was prepared to face regulatory changes and still believes that the country remains an important growth market for it.

Brett Biggs, chief financial officer and executive vice-president, Walmart, said in a conference call on March 5 that the company knew there would be “legislation changes” and it will have to make its way through it.

“When you make investment in India, note things are going to change. They did the first time we were in India and they will again, we know that. We knew that going into an investment and you’ve just got to work their way through. And so, we are going to have real changes, we know that,” Biggs said referring to the changes the Indian government brought to the e-commerce rules for marketplace models which had foreign direct investment.

The rules which came into effect from February 1 prohibits such firms from sourcing more than 25% of their procurement from a single vendor, stops them from having exclusive sale deals of products, and bars sellers in which the e-commerce firm has a majority stake. The rules led players Flipkart and its US-based rival Amazon to rejig their business structure.

Biggs said that India remains a long-term opportunity for Walmart. “Don’t feel any differently than — about it just six months ago. It’s disappointing that you have a law like that changed that quickly, but we’ve made the adjustments and we are moving forward,” he said.

In an earnings call in February, C Douglas McMillon, president, chief executive officer and director of Walmart had said the company remains optimistic about India given its size and low penetration of e-commerce. “In the future, we hope to work with the government for pro-growth policies that can allow this nascent industry and the domestic manufacturers, farmers, and suppliers that benefit from it to develop and prosper. In terms of the regulatory environment, we were disappointed in a recent change in law and the lack of consultation that the team has worked to ensure we’re in compliance with the new rules”.