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Walmart acquires 77% stake in Flipkart for $16 Billion : Top developments

11 May, 2018, 04:44 | Author: Shawna Walton
  • Walmart buys 77 percent stake in Flipkart for USD 16 billion

US-based retail giant Walmart on Wednesday announced the acquisition of 77 percent stake in domestic e-commerce firm Flipkart in a bid to give a tight competition to rival Amazon in the India market.

Japans SoftBank Group Corp sold its 20 per cent stake, which it had acquired for Dollars 2.5 billion, for about USD 4 billion.

US-based online marketplace eBay plans to sell its stake in Flipkart for about $1.1 billion, and will relaunch eBay India focusing initially on cross-border trade opportunity, the company said in a statement. At that point, Meena wrote that Amazon was closing the gap with Flipkart to become the single-largest online retailer in India in terms of sales.

"While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkarts ambition to transition into a publicly-listed, majority-owned subsidiary in the future", it said.

THE e-commerce market in India is worth billions. Therefore, an ironic outcome of this deal is that Indian consumers are going to be subsidised by Walmart's American shareholders even as the United States government challenges India at WTO over its subsidies to farmers and exporters. "The sale of ASDA in the United Kingdom also meant that Walmart needed to identify a new growth avenue - and long frustrated by the byzantine laws governing foreign investment in Indian retail, growing via bricks and mortar retail would have been too complex and slow". It could potentially use those Best Price stores as pickup and delivery points.

The fresh funds will provide more arsenal to Amazon.in, which has been aggressively investing in expanding infrastructure and adding solutions to enhance consumer and seller experience.

The deal also shows how Walmart CEO Doug McMillon is reshaping the company's global operations, prioritizing faster-growing markets like China and India over more mature ones.

Any comment from Walmart regarding the Flipkart deal was declined. Notably, Walmart is going ahead with this in spite of the reported efforts of Amazon to interrupt this deal.

Walmart isn't new to India.

Despite its size and global clout, Walmart has found it necessary to forge alliances in its battle against Amazon, which a year ago bought Whole Foods Market to gain a foothold in the U.S. Sachin Bansal and Binny Bansal, the two IITians who are completely unrelated to each other, started Flipkart's journey way back in 2007 in an unassuming 2BHK home in Bengaluru.

Walmart still tried to enter India via a wholesale model, with Bharti Enterprises in India, but terminated the deal after a $151m loss. In announcing the deal, Walmart warned its shareholders that the purchase would reduce its net income by at least $750 million this year and by more than double that amount next year.

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