Flipkart‘s parent Walmart is happy to see the etailer expanding on its positive contribution margin and that it plays a key role in overall gross sales and revenue growth of the US firm, a senior executive at the world’s largest retail firm has said.

“A lot of our GMV (gross merchandise value) and revenue growth comes from Flipkart. We see great progress there and they continue to be a strong player in the market there. Flipkart has invested in infrastructure in the last three years and now we are able to see the contribution profit and we are excited to see that.” Walmart CFO John David said in the post-earnings call on Tuesday.

A positive contribution margin means the product being sold at a certain price is able to make contributions or generate money after deduction of fixed costs at the firm.

He said ecommerce businesses need investment in infrastructure and then it helps to scale the business at marginal costs and that’s playing out at Flipkart now.

Judith McKenna, president and CEO of Walmart International, echoed David on the earnings call saying these investments continue to lead to good results from Flipkart.

Walmart International, which includes Flipkart, reported net sales of $27.6 billion for the quarter under review, a growth of little over 2% on a year-on-year basis.

The PhonePe separation from the Flipkart group was also highlighted in the earnings which contributed to operating cost increase of 262 basis points. Walmart International’s gross profit rate also increased 52 basis points for sale events, including Flipkart’s flagship Diwali sale of BigBillionDays. “To me this (separation) is very analogous to Ebay and PayPal. Each of them can operate independently and pursue their own initiatives. They don’t necessarily need to be tied together. This is an opportunity to unlock and realise more value independently,” David added.

In December both Flipkart and PhonePe announced their separation formally and the latter has raised $450 million in new funding since then from investors like General Atlantic, Tiger Global, Ribbit Capital and TVS Capital Funds. The company is aiming to raise around $1 billion in primary capital in this round.

“PhonePe ‘s highlight is their TPV reached $950 billion at the end of last year– that was their run rate last year. And now they are doing four billion transactions a month. That separation allowed us to put them on the path of (being) very businesses they can be in the long term. Fundamental for India remains strong and in fact it’s strengthening,” McKenna said.

Globally, Walmart reported $164 billion in total revenue during the quarter under review – an increase of over 7%. Walmart reported a 17% growth in its US ecommerce business during the fourth quarter.

Also read | ETtech Explainer: why PhonePe investors paid Rs 8,000 crore to shift base to India?

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