Walmart buys 77% of Flipkart for $16 billion

Walmart buys 77% of Flipkart for $16 billion

According to Forrester Data, the Indian online retail market is around $20 billion in 2017 (2.4% of total retail market in India), which is still relatively small when compared to the penetration rates of other mature markets.

On Wednesday evening, U.S. retail giant Walmart confirmed that it is acquiring 77 percent of Indian e-commerce startup Flipkart for $16 billion.

US supermarket chain Walmart is making a major play for India's e-commerce market, dishing up USD$16bn (£11.82bm) for a 77% stake in local player Flipkart.

The deal all but assures an ongoing global rivalry between Walmart and Amazon.

Flipkarts sales grew more than 50 per cent in the fiscal year ended March 31, 2018, to Dollars 4.6 billion, Walmart said. In less than a year, the company is now seeking to sell its Flipkart stake for $1.1 billion.

The entrance of Walmart, with its massive scale, resources and logistics prowess, will certainly put Flipkart way ahead of main competitor Snapdeal and threaten to swamp many smaller Indian ecommerce players. An ex-Tiger Global executive, Krishnamurthy has reportedly been offered a "golden umbrella" - a retention bonus of about $2 million if he stays with the company for three years by Walmart. Flipkart has 34 per cent market share while Amazon controls 27 per cent of Indias online sales. "And it fits right in with our strategy", Judith McKenna, Walmart's worldwide chief executive officer, said in a phone interview.

Flipkart competes with Amazon across a range of product categories.

"But the overall question of customer experience will be the key factor", Meena said.

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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.

Sachin and Binny Bansal, both former Inc employees, founded Flipkart in 2007, and like their USA rival, began by selling books. It has over 100,000 registered sellers and 21 warehouse facilities across the country.

Both sources said that Flipkart Group Chief Executive Binny Bansal held a closed-door meeting with the firm's top leadership at its Bengaluru headquarters on Monday, and one added that Bansal said that Flipkart co-founder Sachin Bansal would exit after the Walmart deal is sealed.

The companies said the board makeup was yet to be decided but that Flipkart and Walmart would remain distinct brands.

Flipkart's valuation at $20.8 billion is a 75 per cent increase over its previous valuation in the range of $11-12 billion last August.

Foreign retailers, including Walmart, have faced years of political resistance to opening outlets in India, where mom-and-pop store owners wield enormous influence. That's four times faster than the country's traditional retail market.

Shares of Walmart fell 4pc in afternoon trade after opening at a seven-month low as the company warned it expects the deal to shave fiscal 2019 earnings by 25-30 cents per share if it closes before the end of the second quarter.

"You're looking up the runway, and the runway in India is about as limitless as there is anywhere", O'Shea said.

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