Walmart Buys 77% Stake In Flipkart For US$ 16 Billion
Last week, reports emerged from the Flipkart office that an initial agreement of sale to Walmart had been signed. The world’s largest retail chain, Walmart Inc. has now announced that it has agreed to become the largest shareholder in Flipkart Group. The deal is worth approximately US$ 16 billion and will see Walmart own 77% stake in the Indian e-commerce outlet.
Subject to regulatory approval in India, Walmart will pay approximately $16 billion for an initial stake of approximately 77 percent in Flipkart, formally Flipkart Private Limited.
This announcement has also confirmed another rumour started by a previous report. Walmart announced that investors like Tiger Global, Tencent and Microsoft will not cash out completely. Apparently, Softbank, an investor in Flipkart holds a little over 20% stake in the company. With this acquisition, Softbank will exit the company fully and is expected to make up to US$ 4 billion. This is a whopping 60% return on its investment of US$ 2.5 billion in the company it made about eight months ago.
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.
Flipkart had a successful previous fiscal year. Walmart said that Flipkart recorded GMV (gross merchandise value) of US$ 7.5 billion and net sales of US$ 4.6 billion representing more than 50% year-over-year growth in both cases. With the investment, Flipkart will leverage Walmart’s omnichannel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength.
The two major players in the Indian online market are Flipkart and Amazon. If this deal goes through, the scenario will remain the same. Amazon has been breathing down Flipkart’s neck in terms of market share as Flipkart continues to have a larger market share. According to a report by Forrester, in 2017, Flipkart’s standalone market share was 31.9%, while Amazon’s was 31.1%.
This deal will only benefit the Indian consumers as both Flipkart and Amazon would be vying for the top spot and make sure their services are better than the other. The implications of this deal will be seen in the months to come and it’ll be interesting to see how Flipkart leverages the financial power of the world’s largest retail chain.