Walmart buys $16bn share in Flipkart
Walmart has signed definitive agreements to become the largest shareholder in India’s Flipkart as it makes a massive push in the e-commerce space.
“India is one of the most attractive retail markets in the world, given its size and growth rate”
Subject to regulatory approval in India, Walmart says it will pay approximately $16 billion for an initial stake of around 77% in Flipkart.
The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global Management and Microsoft.
Doug McMillon, Walmart’s president and CEO, says: “India is one of the most attractive retail markets in the world, given its size and growth rate.”
Binny Bansal, Flipkart’s co-founder and group CEO, adds: “While e-commerce is still a relatively small part of retail in India, we see great potential to grow. Walmart is the ideal partner for the next phase of our journey.”
In a flurry of stats, and according to Walmart, Flipkart’s supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.
In the fiscal year ended 31 March, Flipkart recorded gross merchandise volume (GMV) of $7.5 billion and net sales of $4.6 billion representing more than 50% year-over-year growth in both cases.
Walmart plans to make Flipkart a publicly-listed, majority-owned subsidiary in the future. No timelines or details on that.
At present, the duo will “maintain distinct brands and operating structures”. Currently, Walmart India operates 21 cash-and-carry stores and one fulfilment centre in 19 cities across nine states in India, with more than 95% of sourcing coming from India.
Walmart’s investment includes $2 billion of new equity funding. Walmart and Flipkart are also in discussions with additional (unnamed) potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. But Walmart says: “Even so, the company would retain clear majority ownership.”
Tencent and Tiger Global will continue on the Flipkart board, joined by new members from Walmart. The final make-up of the board has yet to be determined, but it will also include independent members.
Closing is expected later this calendar year.
In the wars
The Indian e-commerce market is quite a battle ground.
As reported last month, SoftBank was investing $400 million in India’s Paytm E-Commerce, in a funding round that will value the firm at about $1.9 billion.
In a regulatory filing discovered by Reuters, it revealed that Alibaba, an existing investor in Paytm E-Commerce, was also putting in $45 million in the round.
SoftBank, as befits its size, is one of the major investors in India’s e-commerce market and already owns a stake in Paytm’s parent.
By the way, as reported last year, Flipkart announced an investment – a mix of primary and secondary capital – from Japan’s SoftBank Vision Fund, which was valued at $2.5 billion.
It seems plenty of companies rate Flipkart’s potential.
