How Amazon.com is better positioned to win the battle against Walmart

Background: Walmart Inc, the world’s largest retailer, took 77% equity stake in Flipkart, an Indian eCommerce company, on Wednesday. With Amazon.com establishing its presence organically, the fight to capture the Indian market has now shrunk to these two giants. So who has the better chance of winning this war?

Walmart is the world’s largest retailer, but its online rival, Amazon.com has better war chest when it comes to winning the Indian eCommerce market. Amazon’s cash at hand is thrice that of Walmart’s, though the online giant’s sale is only 36% of Walmart’s topline. Interestingly, Amazon.com has bigger long term debt than Walmart, but its interest cost is 50% lower than the offline retailer. Much more than cash at hand, Amazon’s valuation is thrice that of Walmart’s that gives US online retailer edge to acquire firms through non-cash transactions.

This table gives a preview of where the companies stand:

 

Walmart Inc. Amazon.Com, Inc
Cash 6.7 20.5
Sales 482 177.8
Net profit 15.08 3.03
Earnings Per Share (EPS) 3207 6.32
Market capitalization 252.35 776.43
Long term debt 36.7 45.6
Interest expenses 1.9 0.848

All in $ billion, except EPS
All numbers, except market capitalization, are December 2017.
Market capitalization is as May 9, 2018
Source: Company websites, NYSE

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New Battle Lines Are Drawn

 

77%

What is it?The percentage stake in Flipkartthat Walmart has agreed to buy for $16 billion.

Why is it important?This is the biggest e-commerce deal in the worldand Walmart’s biggest foreign investment. It would help the US retailer get access to India’s nascent e-commerce market, which is expected to grow to $200 billion in a decade. Walmart will also bring its US rivalry with Amazon to Indiaand new battlelines would be drawn between two of the world’s most deep-pocketed firms, in what is being seen as a game-changer for the Indian e-commerce market.

Tell me more:Of the $16 billion, $2 billion is the actual investment in the company, with the rest being used to buy out other stakeholders. Softbank has exited Flipkart, and the rest of the business will be held by co-founder Binny Bansal, China’s Tencent Holdings, Tiger Global Management and Microsoft.

 

4

What is it? The number of judges among the Supreme Court’s five senior-mostwho met on Wednesday to discuss the reiteration of Justice KM Joseph’s candidature for elevation to the apex court.

Why is it important? This is the first time the five judges—who make up the SC collegium that recommends SC judicial appointments to the Centre—met since May 2, when they discussed the Centre’s rejection of Justice Joseph’s candidature but deferreda decision on it. Justice Joseph’s appointment is one of the points of contention inside the SC, as well as between the SC and the Centre.

Tell me more: Justice J Chelameswar was on leave and was not present at the meeting. He is retiring on June 22 and he has declined an invite to a farewellfrom the SC Bar Association.

 

 

$4.6 billion

What is it? The amount Bharti Airtel is reportedly looking to pare from its net borrowings over the next three years.

Why is it important? The telecom firm plans to do this by listing its African unit and potentially sell partial stake in its tower business, in a move that would likely help it protect its investment grade rating. Bharti’s net debt increased 45% to $14.6 billion over four years as it invested in spectrum and infrastructure, and protected its market share, after Reliance Jio initiated a pricing war.

Tell me more: The Sunil Mittal-backed firm reported a net profit of Rs 83 crore in the January to March quarter, a 78% drop on a year-on-year basis. This was its eighth consecutive drop in quarterly net profit.

 

205

What is it? The number of companies whose shares will be delisted by the Bombay Stock Exchange beginning May 11.

Why is it important? The move comes in the backdrop of a government clamp down on shell companies. There are three lists: 188 companies that have remained suspended for above six months, 14 companies whose status on the Ministry of Company Affairs website shows “under liquidation/liquidated” and 3 companies delisted by the National Stock Exchange.

Tell me more: Promoters of these 188 companies have to repurchase shares from public shareholders as per the fair value determined by a BSE-appointed independent valuer.

 

105

What is it? The number of goals scored by Manchester City in 37 matches in the 2017-18 English Premier League season.

Why is it important? On Wednesday, champions Manchester City beat Brighton 3-1. In the process, they went past the single-season record of goals scored in a 20-team EPL format introduced in 1995-96: 103 goals by Chelsea in 2009-10.

Tell me more: Manchester City yesterday also broke the record for the most points in a single season. They now have 97 points, two more than Chelsea in 2004-05. They will be looking to hit 100 pointsin their last game on Sunday against Southampton, which is placed 17th.

 

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For Indian Lenders, Dominoes Have Started Falling

Rs 842.15 crore

What is it? The alleged defrauding of a consortium of lenders, led by the State Bank of India, by Kanishk Gold, a Chennai-based jewellery chain. A case has been reportedly registered by the Central Bureau of Investigation (CBI).

Why is it important? The modus operandi seems to be similar to that of other cases that have surfaced recently: the accused fleeing the country to escape prosecution after failing to repay bank loans. The promoters and directors of Kanishk Gold, Bhoopesh Kumar Jain and his wife Neeta, Jain are believed to be in Mauritius currently.

Tell me more: The firm first defaulted on interest payments to eight banks in March 2017; by next month, no payments were made to all 14 lenders. Along with interest, the firm’s total dues to banks would be over Rs 1,000 crore.

3 to 4

What is it? The number of times the US central bank expects to increase interest rates in 2018.

Why is it important? On Wednesday, the US Federal Reserve, meeting for the first time under new chairman Jerome Powell, raised the benchmark lending rate a quarter-point, signaling a continuity of the direction laid out by his predecessor Janet Yellen. The rate will now hover in a band of 1.50% to 1.75%, against 1.25% to 1.5% previously, and forecast a steeper path of hikes in 2019 and 2020.

Tell me more: US central bankers have projected a median federal funds rate of 2.9% by end-2019 and 3.4% by 2020.

Rs 24,000 crore

What is it? The accumulated losses of Flipkart as of March 2017, up from Rs 10,000 crore a year ago.

Why is it important? This is about half the total amount it has raised so far (nearly Rs 40,000 crore or $6.1 billion), which shows how much it cost Flipkarts to keep up with deep-pocketed Amazon India and the new entrant in the two-horse race, Alibaba Holdings-backed Paytm Mall. Walmart is reportedly planning to buy a third of Flipkart for $7 billion, which would mean a renewed fight between the US retail giant and Amazon in India.

Tell me more: Flipkart’s revenue growth slowed down in the year ending March 2017 to 29% (to Rs 19,855 crore), against 50% growth in the previous year. It also recently asked its sellers to deal with 60% of discounts during sales.

3

What is it? The number of political parties—BJP, Congress and JD(U)—that Ovleno Business Intelligence has claimed to have worked with. Ovleno has a joint venture called SCL India with London-based SCL Group, which is the parent of Cambridge Analytica.

Why is it important? Cambridge Analytica, a British data analytics firm, is in the eye of a storm in three countries—India, the US and UK—for reportedly harvesting data of 50 million Facebook users beginning in 2014. BJP and Congress are accusing each other of having availed the services of the controversial firm during various elections.

Tell me more: The LinkedIn profile of Ovleno’s former directorclaims to have helped BJP “achieve target of Mission 272+”, a reference to its stunning victory in 2014 General Elections. Interestingly, the website of Ovleno was suspended as of Wednesday evening.

5

What is it? The number of runs by which Scotland were trailing West Indies under the run-rate system in the ICC World Cup Qualifiers when rains terminated the match.

Why is it important? As a result, West Indies were declared winners, and they booked one of the two spots for the 2019 World Cup in England. When the match was called off, Scotland needed 75 from 14.4 overs, with five wickets in hand.

Tell me more: Who joins West Indies in Sunday’s final and to 2019 will be determined by the remaining two matches in the Super Six phase. Three teams are in contention: Zimbabwe, Ireland and Afghanistan—.

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More Cities Come Under Metro Rail Network

 

Amazon and Flipkart are outdoing each other, but last quarter was a downer for both the e-commerce giants. On GST, governemnt collected the lowest tax last month ever since the new tax regime was launched in July. A report said, more people are dying prematurely due to air pollution in India and this can get worse in coming decades. Delhi metro has done a ton of good in encouraging other cities to come under the metro rail network. And in cricket, Ashwin reached a milestone on Monday, as India routed Sri Lanka in the second test at Nagpur.

 

92

What is it? The respective scores of Flipkart and Amazon India in the July-September period, according to the latest RedSeer E-tailing Leadership Index.

Why is it important? Scores of both companies have declined from 95 in the previous quarter. Identical scores of India’s top two e-commerce firms in two consecutive quarters indicates intense competition with no clear winner. While RedSeer did not give any reason for the decline in their scores, the previous quarter saw the flagship festive sales of both Flipkart and Amazon, and the higher volume of orders could have affected customer satisfaction levels.

Tell me more: Flipkart has emerged as the most trusted brand in e-commerce in India, while Amazon tops in customer experience.

 

Rs 83,346 crore

What is it? Collections under GST (goods and services tax) for October up to Monday (November 27).

Why is it important? This is the lowest since July, the first month when GST was implemented in the country. The government attributed the lower tax collections to, among other reasons, lower tax incidence on most goods. In a report on Monday, India Ratings said the government’s disinvestment drive and encouraging GST collections would help “reduce pressure on fiscal arithmetic”. The government has used up 96.1% of its full-year fiscal deficit target in the first five months of 2017-18. It has set a fiscal deficit target of 3.2% of gross domestic product for the current fiscal.

Tell me more: The GST collections in July, August and September were Rs 92,283 crore, Rs 90,669 crore and Rs 92,150 crore respectively.

 

30%

What is it? The percentage of premature deaths in India caused by air pollution alone, according to a report by the Centre for Science and Environment (CSE).

Why is it important? It highlights the urgent need for a multi-pronged approach to lower air pollution levels across the country. The report says every third child in Delhi, which is among the world’s most polluted cities, has impaired lungs. Not only are Indian cities witnessing higher pollution levels but 41 tier-II cities exceed the ambient air quality standard. The Organisation for Economic Cooperation and Development has said air pollution could cause 6-9 million deaths by 2060, with the biggest increases in mortality rates in India and China, among others.

Tell me more: The CSE report also said 61% of all premature deaths in the country can be attributed to lifestyle or non-communicable diseases.

 

9

What is it?  The number of Indian cities that will have a metro rail service following the inauguration of the Hyderabad Metro on Tuesday. The other eight cities are Bengaluru, Chennai, Delhi, Gurugram, Jaipur, Kochi, Kolkata and Mumbai.

Why is it important? India has been late to embracing metro rail as a means of public transport, and it’s only in the last decade, following the success of the Delhi Metro, that cities have taken to it. Another two dozen projects are at various stages of completion or lined up with the ministry of urban development.

Tell me more: China has been extremely aggressive in making the metro rail a mainstay of its public transport system. In the global list of top 10 cities with the longest metro rail network, four are from China; Delhi is at number 11.

 

54

What is it?  The number of test matches that Indian off spinner Ravichandran Ashwin took to reach 300 test wickets. Ashwin reached this milestone on Monday, as India routed Sri Lanka in the second test at Nagpur.

Why is it important? Among the 30 bowlers who have scalped 300 test wickets, Ashwin is the quickest to this milestone in number of tests. He bettered the record of Australian fast bowler Dennis Lillee, of 56 matches.

Tell me more: Ashwin is the fifth Indian to reach 300 test wickets. Also, he is only the third blower to return at least 50 test wickets in three consecutive calendar years, the others being Shane Warne (1995-97) and Muttiah Muralitharan (2000-02).

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