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  Business   Companies  19 Aug 2018  Walmart seals deal to acquire majority stake in Flipkart

Walmart seals deal to acquire majority stake in Flipkart

THE ASIAN AGE. | PAWAN BALI
Published : Aug 19, 2018, 4:28 am IST
Updated : Aug 19, 2018, 4:57 am IST

Walmart said its investment includes $2 billion of new equity funding to help accelerate the growth of the Flipkart business.

Walmart said its investment includes $2 billion of new equity funding to help accelerate the growth of the Flipkart business.
 Walmart said its investment includes $2 billion of new equity funding to help accelerate the growth of the Flipkart business.

New Delhi: US retail behemoth Walmart said on Saturday that it has completed its  $ 16 billion acquisition of a majority stake in India’s largest  e-commerce company Flipkart despite opposition from RSS affiliate Swadeshi Jagran Manch and small traders.

Walmart said its investment includes $2 billion of new equity funding to help accelerate the growth of the Flipkart business. This is world’s biggest e-commerce deal. With this deal  Indian e-commerce scene will now be dominated by two US retailers :

Walmart and Amazon. India will be new frontier which will see extension of their war for dominance which is already underplay in US.   

After the completion of the investment, Walmart now holds approximately 77 percent of Flipkart. The remainder of the business is held by other shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global and Microsoft Corp. Moving forward, Flipkart’s financials will be reported as part of Walmart’s International business segment. Both companies will retain their unique brands and operating structures in India, it said. Walmart said that Flipkart’s existing management team will continue to lead the business. Tencent Holdings Limited and Tiger Global Management LLC will remain represented on the Flipkart board, in addition to independent board members, and will be joined by new members from Walmart. The board will work to maintain Flipkart’s core values and entrepreneurial spirit, while ensuring it has strategic and competitive advantages, it said.

“Walmart and Flipkart will achieve more together than each of us could accomplish separately to contribute to the economic growth of India, creating a strong local business powered by Walmart,” said Judith McKenna, president and CEO of Walmart International.

 “Our investment will benefit India by providing quality, affordable goods for customers, while creating new skilled jobs and opportunities for suppliers. As a company, we are transforming globally to make life even easier for customers, and we are delighted to learn from, contribute to and work with Flipkart to grow in India, one of the fastest-growing and most attractive retail markets in world.”

In US, Walmart and Amazon are involved in an intense competition to get an upper hand in retail sector and the same game is expected to be extended to India.

Walmart for long has been trying to gain a significant foothold in India and Flipkart acquisition will provide it what it had longed and lobbied for so hard.

Even though UPA-II allowed FDI in multi-brand retail, BJP led NDA government has been against it. Walmart currently operates just 20 stores in wholesale segment that sells to small businesses, which  doesn’t match with the pace and size the company operates. Flipkart deal will change this for Walmart and allow it to expand without opening stores, said experts.

Morgan Stanley has estimated e-commerce market will grow to $200 billion in about a decade and online sales are growing about 35 percent a year. Besides its own site, Flipkart owns fashion portals Myntra and Jabong

Amazon has committed to invest $5.5 billion in India to expand aggressive.Walmart entered India in 2009 through a joint venture with Bharti Enterprises, and took full control of that business in 2013.

The deal  marked the end of an era for Flipkart as co-founder and chairman Sachin Bansal left the company, selling his 5.5-6 per cent stake for roughly $1 billion. Flipkart’s other founder, Binny Bansal, continues as Flipkart group chief executive officer (CEO).

Tags: walmart, flipkart
Location: India, Delhi, New Delhi