Walmart buys Flipkart, finally: US giant picks up 77% stake in Indian e-tailer for $16 billion: 5 key things

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Updated: May 9, 2018 6:05:54 PM

Walmart acquires Flipkart in a landmark deal worth well above 1 lakh crore rupees. World's largest retailer Walmart has picked up 77% in Bengaluru-based e-commerce major for a whopping $16 billion, or about Rs 1,07,000 crore, as the much awaited deal has finally come through.

Walmart will pay approximately $16 billion for an initial stake of approximately 77 percent in Flipkart,” Walmart said in a press release.

Walmart-Flipkart deal: Walmart acquires Flipkart in a landmark deal worth well above 1 lakh crore rupees. World’s largest retailer Walmart has picked up 77% in Bengaluru-based e-commerce major for a whopping $16 billion, or about Rs 1,07,000 crore, as the much awaited deal has finally come through. “Walmart will pay approximately $16 billion for an initial stake of approximately 77 percent in Flipkart, formally Flipkart Private Limited. The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp,” Walmart said in a press release.  The deal assumes hieghtened significance as it is India’s biggest e-commerce deal in history. We bring you five key takeaways from the development. 

The deal structure

Walmart’s investment includes $2 billion of new equity funding, and the two companies are also in discussions with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. Walmart will also use debt and and cash on hand to finance the investment. Further, Indian e-commerce major Flipkart’s financials will be reported as part of Walmart’s International business segment. Tencent and Tiger Global will continue on the Flipkart board, joined by new members from Walmart. The company said that the final make-up of the board has yet to be determined, but it will also include independent members.  Notably, the deal values Flipkart at $20.7 billion. Closing of the deal is expected later this calendar year, subject to regulatory approval, said the press release.

Walmart’s India bet

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Doug McMillon, Walmart’s president and chief executive officer.  Doug McMillon aslo pointed out that  Tencent, Tiger Global and Microsoft, will be key strategic and technology partners. “Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs,” he said. 

Binny Bansal’s take

“This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India. Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore,” said Binny Bansal, Flipkart’s co-founder and group chief executive officer.

The synergies

Post the deal, Walmart and Flipkart will leverage the combined strengths of both companies, and will maintain distinct brands and operating structures. Through this deal, Walmart’s will be eyeing a greater pie of Indian e-commerce market given the country’s strong GDP growth, a growing middle class and significant runway for smartphone, internet and eCommerce penetration.

CRISIL’s take

“The deal indicates the attractiveness of India’s consumption market for global majors. With Walmart acquiring stake in Flipkart, we expect enhanced thrust on the online grocery segment. We expect online grocery to be the fastest growing segment in the e-retail space, growing at a 65-70% CAGR to touch Rs 100 billion in revenues by fiscal 2020,” Ajay Srinivasan, Director, CRISIL Research said. 

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