Walmart has picked up 77 percent stake in Bengaluru-based e-commerce major for a whopping US $16 billion.
“Walmart will pay approximately US $16 billion for an initial stake of approximately 77 percent in Flipkart, formally Flipkart Private Limited. The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp,” Walmart said in a regulatory filing.
With this biggest deal in the Indian e-commerce space, Flipkart is estimated to be valued at upwards of US $20 billion.
With the investment, Flipkart will leverage Walmart’s Omnichannel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe.
The remaining 33 percent of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp.
While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future
SoftBank, through its Vision Fund, invested US $2.5 billion in Flipkart and that stake will be worth about US $4 billion in the deal, Son told a briefing on Wednesday, according to Bloomberg.
The deal which is among Walmart’s biggest ever in at least two decades, gives it greater access to an Indian e-commerce market, which is slated to grow to to US $200 billion in the next ten years, according to a Morgan Stanley report.
This is also Walmart’s biggest acquisition which will help it compete with its US-based rival Amazon.
The mega deal will give Walmart an opportunity to partner with the local leader in a large, fast-growing market, as the e-tailer leadership team will be supported by the other investment partners.
The deal also underscores Walmart’s long-term commitment to India, where it looks to serve customers, support job creation, small businesses, farmers and women entrepreneurs.
In an investors’ call later, Walmart Chief Executive Doug McMillon said India was a priority market for the retail giant as the country was the largest and fastest growing economy.
“As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market,” said McMillon.
The deal will benefit India in providing quality, affordable goods for customers and create skilled jobs and opportunities for small suppliers, farmers and women entrepreneurs.
“India is one of the most attractive retail markets, given its size and growth rate and our investment is an opportunity to partner with Flipkart that is leading transformation of e-commerce in the market,” he said.
Observing that Walmart’s investment was significant and would help fuel the e-tailer’s ambition to deepen its connection with buyers and sellers, Bansal said though e-commerce was a small part of the country’s retail sector, he saw a great potential to grow.
“Walmart is the ideal partner for the next phase of our journey and we look forward to working together to bring our strengths and learnings in retail and e-commerce to the fore,” he said.
Founded in 2007, Flipkart has led the e-commerce revolution in the sub-continent, growing rapidly and earning customer’s trust with digital technology including artificial intelligence to hard-sell a wide range of goods spanning electronics, appliances, mobile, fashion and apparel.
Walmart statement said: “As a company, we are transforming to meet the needs of customers and look forward to working with Flipkart to grow in this critical market. We are confident of providing the e-tailer strategic and competitive advantage.”
With platforms such as Myntra, Jabong and PhonePe, Flipkart is positioned to leverage its integrated ecosystem, which is defined by localized service, insights into customers and an efficient supply chain.
The supply chain arm, eKart, serves 800 cities, making 5,00,000 deliveries daily.
In fiscal 2017-18, Flipkart recorded Gross Merchandise Value (GMV) of US $7.5 billion and net sales of US $4.6 billion, representing 50 percent year-over-year growth.
Flipkart will leverage Walmart’s Omnichannel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while its talent, technology, customer insights and innovative culture will benefit the US retail giant in India and the world over.
Post-acquisition, both the partners will leverage their strengths but will maintain their distinct brands and operating structures.
“We operate 21 best price cash-and-carry stores and one fulfilment centre in 19 cities across nine states, with 95 per cent of sourcing from the country, aiding suppliers, creating skilled jobs and contributing to local economies,” said Walmart India Chief Executive Krish Iyer in the statement.