Dive Brief:

• A possible acquisition of Indian e-commerce giant Flipkart is turning out to be a tussle among investors, with formal bids on the table from both Amazon and Walmart as of Wednesday, according to various news reports. Amazon and Walmart each declined to comment, and Flipkart didn’t immediately return Retail Dive’s request.

• With a bid said to range between $22 billion and $23 billion, along with a breakup fee of some $1.5-$2 billion, Amazon has edged out Walmart’s reported $18-$20 billion offer, according to the Economic Times, an Indian English-language daily. Despite that, Amazon's offer is reportedly not cutting it with those favoring the Walmart bid, according to the report.

• Japanese multinational conglomerate (and Flipkart investor) SoftBank is said to favor the Amazon offer, while Flipkart investors Tiger Global Management, Accel, Naspers and Tencent are rooting for Walmart, according to the report.

Dive Insight:

The details of why investors favor one suitor for Flipkart over another comes down to what’s in it for them, but nevertheless are a major factor in the outcome, according to Mihir Kittur, co-founder of e-commerce analytics company Ugam.

"Making sure that the investors come to the same page will be the difficult part, but unless the terms are outlandish, it’s long over due," he told Retail Dive in an interview.

Morgan Stanley analysts have said Flipkart could reach $119 billion in sales by 2020. In 2016, however, they 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 the June 2015 funding round. (The financial services firm owns a small stake in Flipkart.)

Amazon and Walmart each have good reason to pursue the Bengaluru-based e-retailer, which was launched by former Amazon employees in 2007. 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 —  outpacing even China.

The new government guidelines are designed to push up 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 and inking an exclusive deal with three more years to go. (That's another complication for both Walmart and Amazon, although Ebay CEO Devin Wenig last week refused to speculate on the acquisition rumors. "[T]hat is a relationship that makes us both the exclusive importer and exporter of goods on the Flipkart Marketplace. We’re happy with that partnership," he said.)

The new Indian e-commerce rules could complicate things for Amazon in the eyes of regulators, and if Flipkart is overtaken by Amazon's branding, for consumers too. Although Flipkart is widely known to be supported by foreign investment, it is nevertheless very much perceived as an Indian company. "There's a nationalistic part to that — Flipkart has always presented itself to be the homegrown e-commerce play," Kittur said.

But Amazon has much to gain. 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. Last year Amazon also took a 5% stake in Indian retail company Shoppers Stop. Flipkart could furnish Amazon with a distribution infrastructure, along with sellers and geographic areas that Amazon doesn't already have, according to Kittur. 

Meanwhile, merger discussions between Walmart and Flipkart first commenced in 2016 and later broke down, but now Walmart is apparently ready to sign on the dotted line. "It would provide significant benefit for Walmart because it certainly gives them" access to India’s burgeoning market, Kittur said. "Trying to do it themselves organically would take them a very, very long time."

A Walmart-owned Flipkart would likely remain "Flipkart," he also said. "Reinvesting in branding is a huge exercise and Flipkart already has a good brand in India."

He compares a Walmart acquisition of Flipkart to the e-commerce giant's acquisition of Jet in the U.S. over a year ago. "It means cutting edge innovations and digital experiences that can be leveraged elsewhere — a lot of companies look at India because it’s not just about cheaper, but about 'better.' And they can’t leave slack when it comes to [competition with] Amazon."