Walmart buys controlling stake in India's Flipkart

Walmart, India's Flipkart to announce e-commerce $15 billion mega deal

Reports also suggest that the USA retailer insisted on having only one of the founders on board, so Sachin Bansal will be bidding farewell to the company he has been building since October 2017.

Walmart announced Wednesday that it has bought a 77 percent majority stake in Flipkart, India's largest online retailer, for $16 billion.

As industry applauded, sections of traders and the RSS affiliate, Swadeshi Jagran Manch, alleged that Walmart was "circumventing" rules for a "back-door entry".

"We are actively working to shape the portfolio of geographies and businesses we're in, in order to set the company up for success for another generation", Walmart CEO Doug McMillon said in a conference call Wednesday.

In 2016, Binny Bansal took over as the CEO of the company.

Like Amazon until recent years, Flipkart - which also started out selling books, in 2007 - has operated in the red despite massive growth, with net losses increasing by 68% in 2017.

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.

Walmart said it would pump $2 billion of new equity into Flipkart, giving the Indian e-tailer a bigger war chest to fight off a huge challenge from Amazon, which is rapidly expanding its reach. In the statement, Walmart revealed intentions to retain Flipkart's goal to become a publicly listed majority-owned subsidiary. While the deal was being watched by world leaders, back home there were voices of protest.

Today, Indian e-commerce industry is already close to Dollars 30 billion in size and analysts expect this to zoom to USD 200 billion by 2026.The growth of the sector was comfortably in sync with the meteoric rise of Flipkart.From a modest two-bedroom apartment in Koramangala, the Bengaluru-headquartered company now has multiple offices across the country.

India allows 100% FDI in e-commerce marketplace subject to certain restrictions.

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$250 billion worth Walmart, world's largest retailer and world's largest private employer has officially acquired Flipkart by paying mind-boggling $16 billion. This would give Walmart access to the fast-growing online retail space in the country.

But I have long argued that Walmart is not going to win its battle with Amazon by taking baby steps or simply imitating Amazon's playbook. But the Indian authorities are already asking Walmart and Flipkart about the tax liabilities post the mega transaction. "Our investment will benefit India by providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers, and women entrepreneurs".

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.

Walmart has also opted to use Tencent's mobile payment system, WeChat; in the process dropping the Alibaba-linked Alipay in all its stores in the western region of China and giving WeChat a significant boost in the battle for China's almost $13 trillion mobile payment market.

Softbank, Naspers, IDG and other large investors in Flipkart will completely exit through this deal. "We are also excited to be doing this with Tencent, Tiger Global and Microsoft, which will be key strategic and technology partners". The discounts will be largely subsidised by Walmart's shareholders.

Flipkart competes with Amazon across a range of product categories.

Walmart said it plans to fund the India deal through a combination of newly-issued debt and cash on hand.

Shares of Walmart Inc. dropped more than 3 percent Wednesday as investors anxious about the investment hurting profits.

The company also operates other retail chains, including Sam's Club membership warehouse stores around the world, ASDA stores in the United Kingdom, Bodega Aurrera stores in Mexico and Seiyu stores in Japan.

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