To access a market Walmart has been trying for years, USA based Walmart is set to invest $16 billion to acquire a controlling stake of 77% in Indian online retailer Flipkart. Walmart had been restricted by local regulations to operate wholesale outlets in India.
According to Walmart CEO Doug McMillon:
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market.”
The deal includes Walmart pumping in $2 billion in fresh investment into Flipkart while also potentially bringing additional investors to retain a majority stake in Flipkart according to a conference call by chief financial officer Brett Biggs.
Walmart’s decision to buy a majority stake in Flipkart was also due to Flipkart’s strong presence in fashion, electronics and digital payments.
Subject to regulatory approval the news of the deal was let slip by SoftBank CEO Masayoshi Son in an earnings presentation who has also invested $2.5 billion in Flipkart last year. In the presentation, Son said the sale to Walmart valued Softbank’s take at $4 billion which implied to a bumper return of 60%.Flipcart’s previous investors will retain stakes in the company and they are co-founder Binny Bansal, Chinese tech giant Tencent and Microsoft.
Morgan Stanley expects the Indian ecommerce market to be worth $200 billion by 2026. Walmart cited estimates that online shopping in India will by 36% in the next five years which is four times faster than the country’s traditional retail market.
Founded by two former employees of Amazon namely Sachin Bansal and Binny Bansal in 2007, Sachin Bansal is leaving the company after 10 years and neither Walmart nor Flipkart commented on how big Sachin Bansal’s stake was or whom he sold it to.
According to Charlie O’Shea, lead retail analyst at Moody’s:
“This is clearly an investment for the future, and… is indicative of Walmart’s long standing strategy of shifting resources into higher growth potential markets.”
However Amazon may have been trying to Spoil Walmart plans until the very last minute as some Indian media reported that it made a counter offer to buy Flipkart.
Founded by Sachin Bansal and Binny Bansal, Flipkart Online Services Private Limited owns and operates as an e- commerce website. Headquartered in India, the company provides books, movies, music, games, consoles, televisions, mobiles, digital cameras, computers, network components, software, peripherals, home and kitchen appliances.
Founded in 1945, Walmart engages in the retail and wholesale operations worldwide. Headquartered in the US, Walmart operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, drugstores, and convenience stores; membership-only warehouse clubs; e-commerce Websites, such as walmart.com, jet.com, hayneedle.com, shoes.com, moosejaw.com, modcloth.com, bonobos.com, and samsclub.com; and mobile commerce and voice-activated commerce applications. Walmart employs around 2300000 employees worldwide.