US-based retail giant Walmart on Wednesday announced the acquisition of 77 percent stake in domestic e-commerce firm Flipkart in a bid to give a tight competition to rival Amazon in the India market.
Launched in 2007, Flipkart's two co-founders, Sachin Bansal and Binny Bansal, previously worked for Amazon and both studied computer science engineering at the Indian Institute of Technology in Delhi. With this buyout, Walmart will own around 77% of Flipkart, as the deal values the Bengaluru-based e-commerce firm at $20.8 billion.
In March, Meena forecasted that India's online retail market remained the fastest-growing market in the world.
"This investment is of huge importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India", said Binny Bansal, Flipkart's co-founder and group CEO. More importantly, it intensifies the battle between Walmart and retail giant Amazon in the emerging Indian e-commerce market.
Investors like Microsoft and Tencent plan to stay on board, and might or might not benefit from the IPO that walmart says it reportedly plans three years or so down the line. In its projections, Walmart has indicated that it expects Flipkart's operating losses to nearly double from its fiscal 2017 level of Rs 4,586 crore to Rs 9,111 crore by fiscal 2020.
Walmart and Flipkart will remain separate brands and the Indian e-commerce firm will have an independent board, which will be revamped to give representation to the U.S. firm.
Now, ET claims Bansal was deeply engaged in the negotiations with Walmart, and was even planning to buy more shares and not sell his stake.
Flipkart has had its fair share of challenges over the past few years despite being a hit among Indian consumers.
While Amazon has missed out on an opportunity to buy out Flipkart, it will be business as usual for the world's largest online retailer.
Meanwhile, as Walmart and Flipkart close the $16-billion deal, retail experts and trade associations expected a slight "rumble" or "a little bit of shiver" in the industry due to it.
Indian e-commerce has been both a victor and loser because of this deal. The country's population of over 1.3 billion remains a mostly untapped market for online retailers.
Right now, Walmart is running 21 wholesale shops in India.
Such is the force & magnitude of this mega-deal worth $16 billion (Rs 1.04 lakh crore), that it changes everything for Indian e-commerce and digital sector. Walmart has tried to make a bigger push into apparel online with acquisitions like Bonobos and ModCloth, along with a partnership with department-store chain Lord & Taylor. For its fiscal year, ended 31 March, Flipkart generated USD$7.5bn (£5.54bn) in gross merchandise volume and net sales of USD$4.6bn (£3.4bn).
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