Walmart buys a controlling share in India's Flipkart

Marcus Newton
May 10, 2018

The investment will help accelerate Flipkart's customer-focused mission to transform commerce in India through technology and underscores Walmart's commitment to sustained job creation and investment in India, one of the largest and fastest-growing economies in the world.

The purchase is about "setting the company up for growth and profits in the future", Walmart Chief Executive Doug McMillon said on a call with investors.

In a surprise move, Walmart's acquisition of Flipkart is also back by Google who has brought in $1.5 billion for a 7 percent stake in the e-commerce company.

Flipkart co-founder and Group CEO Binny Bansal said the deal was of enormous importance for India and would help fuel the company's ambition to deepen its connection with buyers and sellers.

"Walmart is purchasing Flipkart", Softbank CEO Masayoshi Son said during the presentation (speaking in Japanese with translation provided by a SoftBank representative).

Bentonville, Arkansas-based Walmart will acquire about a 60 percent stake in Flipkart, while Alphabet will get a roughly 15 percent stake in the online marketplace for about $3 billion, one of the sources said.

A giant and risky food fight is breaking out in India. Another point in discount giant Walmart's favor is its apparent willingness to let Flipkart founders Sachin and Binny Bansal continue to help lead the business.

It added that both companies would maintain their brands and operating structures.

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Flipkart had bought eBay India operations past year.

Meanwhile, Amazon is also still fighting hard in India, with founder Jeff Bezos crowing last month that had the most-downloaded shopping app in India for 2017. SoftBank has invested $2.5 billion in the Indian company and that stake will be worth about $4 billion in the deal, Son said.

Walmart's investment includes $2 billion of new equity funding.

Noticeably, the other co-founder Binny Bansal (not related) will stay at the company. Walmart has acquired 77% stake in Flipkart for a whopping $16 billion.

The American retail giant will be thrilled if it can replicate the success of the Flipkart-Myntra deal. "It is much more hard for the government to control and regulate foreign owned platforms and all indigenous players will have no value if a foreign company runs the platform", Khandelwal claimed. To put this in context - supply chain is also the strength of Amazon, Flipkart's ace competition.

"It's capital intensive business that needs deep pockets which Walmart has", tweeted Shaw.

Walmart is trying to mitigate these concerns with plans to partner with local kirana owners to modernize their retail practices and transition to digital payments.

Other reports by MaliBehiribAe

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