The world of e-commerce has just witnessed an historic moment. US retail king Walmart has purchased 77% stakes in India’s largest online shopping store Flipkart.
This makes this business deal the largest acquisition in India and the largest purchase of an ecommerce company in the world. It has also increased the Flipkart, making it $22 billion.
This merger also results in the largest exist for private equity and venture capitalist ventures. All of them will collectively make $14 billion by selling their shares to Walmart.
One of the co-founders Sachin Bansal has decided to exit while other co-founder Binny Kaushal has kept his investments in the company. He will hold the remaining 23% stakes in the company along with Chinese Internet firm Tencent, investment company Tiger Global and software firm Microsoft Corp.
If sources are to be believed, Walmart is also in talks with Google parent firm Alphabet to invest at least $ 1-2 billion in the acquisition.
What led Walmart to Invest in Flipkart?
After hearing news of such large merger, most of you might be thinking:
What can be Walmart’s motivation behind such a big deal?
Well, this is your answer:
If sources are to be believed, Walmart has plans to use Flipkart’s expertise for global expanson.
Here’s what Walmart Chief Executive Doug McMillon said in his statement to Flipkart employees:
“We hope we learn from you how to build an ecosystem, more about innovation and payments – we will help with sourcing, and supply chain expertise.”
Is this going to change anything in Flipkart?
Both Flipkart and Walmart told in a press release that Flipkart brand will remain distinct from Walmart.
“It’s our intention to just empower you and let you run – speed matters, decisiveness matters,” Walmart CEO Doug McMillon told Flipkart employees in a town hall meeting.
The only thing that’s going to change in the company is that Flipkart will soon go on Initial Public Offering (IPO). Although, timeline has not been specified yet.
How it started?
This all started back in September 2016, when Walmart expressed interest in purchasing stakes in Flipkart. Although, by the beginning of this year, talks were shifted towards acquisition. Chairman of the Walmart board Greg Penner played a crucial role in doing so.
It must be noted that Flipkart is the king of e-commerce in India. The retail store rules just about every category of purchase and poses a tough competition to even the global online shopping giant Amazon.
Don’t believe my words. Have a look at the image:
What can be expected from this association?
This is an association between two powerful organizations, where one is the king of the retail world, while other is a leading e-commerce store in a country of over 100 billion people. This will benefit both the companies.
Here’s what the CEO of Flipkart group has to say in his press release:
“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.”
Similarly, Walmart will have a cutting-edge against its fierce rival Amazon in India. The share of online retail will also receive a boost after this deal.
“This allows Walmart to jump into a high-growth market, and results in two global players focusing on the growth of the Indian ecommerce market.
The ecommerce fight ahead should be less about market share than about growing the market manifold,” said Prasanto Roy, vice-president of Nasscom’s Internet Council.
So, this deal is a benefit to everyone involved in the retail world. Some experts are even considering is the largest contribution to the growth of India.
According to Rajneesh Kumar, senior vice president Walmart India:
“This investment shows Walmart’s commitment to India’s growth story and its continued progress on the World Bank’s ease of doing business ranking
There will be tremendous value that will be derived out of this investment by strengthening the back-end supply chain infrastructure and benefit of Indian farmer community, which will multiply their income.”
What’s the market response?
Well, the response in the US market wasn’t too good as its value saw a decrease of 4%. Indian experts weren’t so happy as well.
“I would have liked a native company to go on and become the Amazon and Alibaba of India,” said Kalaari Capital managing director Vani Kola.
Shopclues cofounder and CEO Sanjay Sethi said:
“Indian ecommerce will now have Amazon, Walmart and Alibaba, which is exactly what the FDI (foreign direct investment) policy did not want.”
Anyway what do think about the investment?