Walmart to hit buy on $12 billion Flipkart deal?: Key things to know

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Updated: April 25, 2018 9:52:21 AM

With world’s largest retailer Walmart Inc adding India’s Flipkart to its shopping cart in a $12 billion deal, we are in for the biggest deal in India's e-commerce space. We take a closer look.

The billion deal could mean substantial windfall for Flipkart’s promoters and selling shareholders.

With world’s largest retailer Walmart Inc adding India’s Flipkart to its shopping cart in a $12 billion deal, we are in for the biggest deal in India’s e-commerce space. Interestingly, the deal values Flipkart at $20 billion according to a Bloomberg report. This could mean a handsome reward for Tiger Global, one of the oldest investors in e-commerce giant Flipkart. Tiger Global Management will sell nearly all its 20 percent stake in Flipkart, while SoftBank Group Corp is expected to offload a substantial part of its 20 percent-plus holding, sources told Bloomberg. Currently, Tiger Global owns a little more than 20 per cent, while Naspers owns around 13 per cent, and Accel around 6.44 per cent in Flipkart. We take a closer look at how the deal may play out.

Walmart’s big India bet

The deal will give the world’s biggest retailer Walmart a substantial foothold in India, and will also pit it against rival Amazon, even as consumers migrate to e-commerce. Notably, according to a report by Assocham and Deloitte, the digital commerce market in the country is expected to cross USD 50 billion in value by the end of 2018 from December-17 level of USD 38.5 billion, on the back of a growing internet population and increased online shoppers. “There isn’t another country with this kind of an opportunity. India may not be a big deal now, but it’s the future opportunity that Walmart and Amazon are eyeing,”  Satish Meena, a New Delhi-based senior forecast analyst at Forrester Research Inc told Blomberg.

A sweet deal for Flipkart

The $20 billion deal could mean substantial windfall for Flipkart’s promoters and selling shareholders. While who sells how much is not immediately clear, Japanese investor Softbank SoftBank is expected to make a tidy profit on a deal it cut last year, upto $4 billion. Just last year, Flip0kart had been valued at $12 billion. This revision in valuation will come as good news for co-founders Sachin and Binny Bansal. Bloomberg says that Flipkart’s board had seriously considered Walmart and Amazon as potential partners, but ultimately decided Walmart could close a deal more easily.

Heightened rivalry

The deal could mean a setback for rival Amazon, even as top boss Jeff Bezos has planned to pump in $5.5 billion this year. Taking note of his India business, the world’s richest man Jeff Bezos said that Amazon.in is the fastest growing marketplace in India, and the most visited site on both desktop and mobile, according to comScore and SimilarWeb. In what is Walmart’s biggest deal in two decades, the deal will intensify rivalry in the space.  Currently, Amazon.com holds 27 percent of India’s $30 billion e-commerce market.

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