Walmart buys 77 per cent stake in Flipkart for $16 billion

Walmart buys 77 per cent stake in Flipkart for $16 billion

Walmart said it would support Flipkart's ambition to transition itself into a publicly-listed, majority-owned subsidiary in the future

In the single largest transaction that the e-commerce sector has seen globally, Walmart has signed a definitive agreement to acquire 77 per cent stake in Flipkart with an investment of around $16 billion. The deal will value Flipkart at around 20.8 billion dollars, up from its previous valuation of $12 billion.

Of that amount, $2 billion will new equity funding while the rest will be utilised to acquire the stake from existing investors, including Softbank, Naspers and co-founder Sachin Bansal. In a statement, Walmart said it would support Flipkart’s ambition to transition itself into a publicly-listed, majority-owned subsidiary in the future.

“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 the transformation of eCommerce in the market,” said Doug McMillon, Walmart’s president and chief executive officer, in a statement.

“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 added.

In the statement, Walmart and Flipkart said they were in talks with other investors to join in the round as well, which could bring down Walmart’s stake after the transaction is complete. While they did not name potential investors, Alphabet (parent company of Google) is said to be among the investors that is looking to back the Indian online retail giant.

Binny Bansal, Group CEO at Flipkart, will continue at the company post the investment, while partner Sachin Bansal will cashing in his 5.96 per cent stake in the company which will amount to around $1.23 billion. Softbank, Naspers, IDG and other large investors in Flipkart will also completely exit through this deal.

“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,” said Binny Bansal, Flipkart’s co-founder and group chief executive officer.

“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,” he added.

Walmart will help Flipkart take on Amazon, which has invested billions of dollars into the country over the past five years in a bid to dominate the country’s online retail space. After investing around Rs 81.5 billion into its e-commerce unit in FY18, the company started this year on a bang with an additional investment of Rs 26 billion late last month into the same unit. Bezos, the founder and CEO of Amazon has committed to invest $5.5 billion into India to win in the country.

Source: Business standard