Walmart Dropping $16B On Indian E-Commerce Giant Flipkart

Walmart Dropping $16B On Indian E-Commerce Giant Flipkart

For Walmart, buying a majority stake in India's Flipkart Group was a unique opportunity that couldn't be passed up: allying with an e-commerce driver in a burgeoning retail economy poised to become a global powerhouse.

RSS affiliate Swadeshi Jagran Manch even asked whether the deal amounts to circumvention of rules, with a "back-door entry" of Walmart into Indian retail market, which is hard for the multi-national behemoths to tap into.

It took some time, but Tiger Global Management is starting to wring some serious paydays out of its tech investments.

"If there's one thing we can learn from the recent Flipkart saga, it's this: never count out Walmart".

Walmart shares dropped as much as 4.2% to $82.12 as of 10:28 a.m.in NY - the lowest intraday price since October. The transaction is expected to close later this year and will be subject to regulatory approvals. Forrester expects the online retail market in India to reach $73 bn by 2022 from $20 bn in 2017. That's seen increasing in 2020, to a negative impact of some $0.60. The credit firm rates Walmart AA, the third-highest investment grade. Sachin's exit is, however, seen to be affecting Flipkart's private label project named Billion, which sells branded smartphones, home appliances, and fashion products.

US supermarket chain Walmart is making a major play for India's e-commerce market, dishing up USD$16bn (£11.82bm) for a 77% stake in local player Flipkart. India needs no introduction; it's a fantastically growing market.

The blockbuster takeover, which is also Walmart's most expensive acquisition, threatens a major blow to rival Amazon's lofty ambitions in India.

Softbank, one of Flipkart's biggest investors, held an earnings presentation on Tuesday and let news of the deal slip slightly early. Walmart owns a 12.1% stake in Tencent subsidiary JD.com, China's second largest e-commerce company.

The market capitalisation of the US-based retailer dropped to $242.9 billion, hitting a seven-month low.

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Exhorting "Flipsters" to continue to do a good job, (Sachin) Bansal in his Facebook post lauded the company, which he said "truly upheld audacity and customer centricity ....and solved many complex problems for India".

The Confederation of All India Traders, which represents thousands of small businesses, has written to the government urging it to block the deal.

SoftBank also plans to give up some of its stake in USA wireless company Sprint, under a $26.5 billion merger deal that will combine it with T-Mobile. Flipkart was already struggling to keep pace with the huge investments that Amazon was able to infuse into its India operations.

Bezos has committed $5.5 billion to the country and his local chief, Amit Agarwal, has made progress by adapting the site to local conditions.

It was also a landmark year for the e-retailer with it clocking a registered user base of 100 million.

Walmart still tried to enter India via a wholesale model, with Bharti Enterprises in India, but terminated the deal after a $151m loss. India is the next big potential prize after the USA and China, where foreign retailers have made little progress against Alibaba Group Holding Ltd. "Nobody will be better positioned in Asia than we will be".

Amazon was also said to have put in an aggressive offer to buy 60 per cent of Flipkart, but the board of the Indian firm is said to have favoured the Walmart offer. The biggest was Sachin Bansal selling his entire 5.96 per cent stake for $1.23 billion and parting ways with Flipkart that he had founded in 2007 along with friend from IIT, Binny Bansal (not related). The company recently offloaded its United Kingdom supermarket business to Sainsbury's for $4.1 billion and a 42% stake in the combined company. S&P Global Ratings said the heavy spending to compete with Amazon could threaten Walmart's pristine credit rating.

In India, Naspers still retains OLX, an online classifieds business, PayU, a payment and fintech services provider, and its investments in Swiggy, an online food delivery company, and MakeMyTrip, an online travel business.

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