In what is being described as the world’s largest e-commerce deal, US retail giant Walmart has bought a 77% stake in Flipkart for $16 billion. This investment includes USD 2 billion of new equity funding which will help Flipkart accelerate growth in the future, the company said while announcing the deal on Wednesday.
Walmart’s entry into India is likely to heighten the competition in the Indian e-commerce market where Amazon already has a sizeable presence.
The world’s largest e-commerce deal is also being described as one of the biggest Foreign Direct Investments (FDI) into India. Walmart had earlier come out with a valuation of $ 20 billion for the Indian e-commerce leader.
Softbank of Japan, which was an investor in Flipkart, said that it was exiting by selling its entire 20% stake to Walmart. Sachin Bansal, who co-founded the company with Binny Bansal in 2007, will also exit. Flipkart is India’s first billion-dollar e-commerce company.
Walmart said that 23% stake would be held by Binny Bansal, Tencent, Tiger Global, Microsoft Corp, and others.
India An Important Market
Walmart said that the Indian retail market was expected to reach USD 1.3 trillion and become a top-5 e-commerce market in the next five years.
Announcing the deal, Walmart President & CEO Doug McMillon said that India was the largest and fastest growing economy in the world. He also referred to India’s growing middle class and relatively young population as he went on to explain how India was a priority market for the company.
Walmart had entered the Indian market through a joint venture with Bharti Enterprises in 2009. It later took full control of that venture and operates nearly 20 wholesale stores that cater to small businesses.
“With this investment, we are pleased to be making a long-term commitment to India’s future,” McMillon said. He said the company believed that this investment would contribute to sustained economic growth especially across India’s agriculture, food, and retail sectors.
“Jobs will be created through development of supply chains, commercial opportunity, and direct employment,” he pointed out. The company would continue to invest in local communities, partnering with kirana owners and members to help modernise their retail practices, the Walmart President & CEO said.
He pointed out that Flipkart’s supply chain arm Ekart served more than 800 cities and made 5,00,000 deliveries daily.