Dive Brief:

• Merger discussions between Walmart and Flipkart commenced in 2016 and later broke down, but Walmart has since rekindled interest in acquiring a majority stake in the homegrown Indian e-commerce giant, according to a report from Indian business newspaper Mint. 

• Earlier this week the financial news outlet reported that Walmart is ready now to buy 55% of Flipkart with an offer that could value Flipkart at $21 billion. 

• Armed with that deal, Flipkart then turned to Amazon as a potential suitor, Mint reported on Thursday, adding to its Wednesday report that Amazon, too, is mulling an investment in Flipkart. Both Amazon and Walmart declined to comment to Retail Dive.

Dive Insight:

Even prior to new guidelines from the Indian government last year designed to spur online marketplaces, India posed an undeniably intriguing opportunity for e-commerce players. A study from the Internet and Mobile Association of India found there were 52 million new Internet users there in the first six months of 2015, bringing the country's total user base to 352 million as of mid-2016. And of those, 213 million — more than 60% — accessed the web through their mobile devices.

India is the top developing country for retail investment, on the strength of a growing economy and middle class, and a favorable regulatory environment, according to A.T. Kearney's Global Retail Development Index last year. China came in second, a ranking mostly driven by size and the continued evolution of its retail environment, despite slowing economic growth overall, according to that report.

The new government guidelines are designed to push up homegrown Indian e-commerce businesses, encouraging foreign investment but not foreign ownership and operation. Last year Flipkart acquired eBay's India operations, with the U.S. digital marketplace also investing $500 million cash in Flipkart for an equity stake.

Flipkart, founded in 2007 by two former Amazon employees, is a major player in India's e-commerce market, which Morgan Stanley analysts have said could reach $119 billion in sales by 2020. In 2016, however, Morgan Stanley took a chunk out of Flipkart's valuation, reducing its assessment of the e-commerce venture by 27%, bringing it down to $11 billion from the $15 billion valuation it enjoyed at the time of its June 2015 funding round. (The financial services firm owns a small stake in Flipkart.)

The country is home to one of Amazon's longest-standing international business units, and the company recently began making some headway against Flipkart, in particular by working to grow its private-label offerings in the area. Last year Amazon also took a 5% stake in Indian retail company Shoppers Stop.

For either Walmart or Amazon, a deal with Flipkart would mean a greater foothold in a developing country with eager consumers — and less competition. However, there are some challenges for e-commerce in India, too. While mobile is well established and e-commerce is growing, the physical infrastructure needed to get goods from point A to point B is in need of further development, according to experts. That means that retailers used to being able to offer two-day shipping to just about anywhere in the U.S. or Europe can only manage that in certain areas of India.