It’s official. Walmart acquires Flipkart to enjoy a lion’s share of e-commerce industry in India.
Reportedly, Walmart, No. 3 in the Internet Retailer 2017 Top 500, has sealed the deal with Flipkart at $16 billion, a valuation of $20.7 billion. This is one of the biggest e-commerce deals and this ascertains the online inventory to lock horns with Amazon which is No.1 in Internet Retailer 2017 Top 500. As per the contract, Walmart has acquired 77% stake in Flipkart which is again considered one of the biggest chalk-up for the US firms.
Besides Walmart acquiring Flipkart, it’s the involvement of Alphabat Inc. – the company that owns Google. Alphabet will get about 7% ownership of Flipkart.
Closed on Tuesday night, the Walmart Flipkart deal is the largest in India, after Russian Rosneft’s $12.9 billion buyouts of Essar Oil.
As part of the deal, Co-founder, Sachin Bansal has to quit entirely, giving up his 5.5% stake.
Walmart’s Thought-Through Ally; Win-win Situation
Flipkart has been dominating e-commerce grounds in India until Amazon entered. Amazon’s incursion gave Flipkart very intense competition. Although it has maintained its position as a leviathan player in India’s online retail market, the market share estimations of Flipkart have been majorly contested for.
Walmart has been seeking India’s retail sector for years now, but due to existing foreign direct investment policies of India, it couldn’t camp his significant existence. Although owning 20 wholesale stores in around 8 states across the country, Walmart was prevented to make significant retail presence due to these policies. The acquisition of Flipkart by Walmart would be the biggest investment for sure, but at the same time, it would open up alleys to boost its presence in India.
Adding up to the advantage, reports by Forbes suggests that Walmart being able to acquire Flipkart will score a major slice of the market. This can be deduced by the fact that it’s expected to hit around $200 billion by 2026, which is to grow at CAGR of 30 percent for gross merchandise value (GMV). The acquisition of a majority stake in Flipkart would be Walmart’s even-odds to reinforce it’s potential in the “horizontal” e-commerce sector in this country.
With Walmart, Flipkart too stands at winning the much-needed confidence of it’s retailing potential. Furthermore, it will virtually double its market share and be taken into account globally.
Walmart to retain top executives
As Tiger Global is expected to clinch the deal with much of its 20% stake as part of the Flipkart-Walmart deal, up-and-coming news claim that Walmart is keen on retaining Kalyan Krishnamurthy as the CEO. In like manner, there are supposed plans to ensure that key executives at Flipkart continue working and retention strategies for this will be employed as well.
Amazon And Walmart Lock Horns; By and Large
The never-ending international Walmart-Amazon battle has now beefed up on to Indian grounds. With Walmart acquiring it, Flipkart could now finally develop its business and hence, aiding Walmart to challenge its rival incumbent, Amazon. The US retail giant can fight for dominance at a global level and can give Amazon a tough game. Walmart’s expertise can aide Flipkart at launching it’s much anticipated Online groceries and that too at a considerably faster pace.
As per recent reports, Amazon, in a faint attempt, tried to ruin Walmart-Flipkart deal by tuning in a formal offer to buy 60% of Flipkart for its operation in India. In a recent investor call, Amazon CFO Brian Olsavsky added that, since the potential of progress is high in India, the company would continue to invest in the country.