Walmart snaps up Flipkart as companies vie for Indian e-commerce market

09/05/2018

Walmart has agreed to pay $16 billion for a 77% stake in India’s leading online retailer, Flipkart.

The e-commerce platform that was founded as an online bookstore in a two-bedroom Bengalore apartment is now valued at $20.8 billion.

Ending nearly two years of negotiations, the deal marks a win for the Arkansas-based retail giant, which has long been trying to establish a foothold in India’s emerging e-commerce market.

The deal is indicative of a larger international race, primarily between Chinese and American investors and companies, to capture what many see as the next massive e-commerce market. The Indian e-commerce industry is expected to be worth as much as $200 billion by 2026, according to the IBEF. From 2016-2017, the market grew 19.1%, reaching $33 billion.

“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 transformation of e-commerce in the market,” Walmart CEO Doug McMillon said.

Flipkart’s strong presence in sectors such as fashion, electronics and digital payments were major factors behind Walmart’s decision to buy the company, McMillon added.

While China remains the world’s largest e-commerce market, India still has plenty of room to grow. It’s the untapped potential that has created such investor fervor.

 

 

“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 transformation of e-commerce in the market,” Walmart CEO Doug McMillon said.

 

 

Just recently, Alibaba acquired a $200 million stake in India’s e-commerce grocery store, BigBasket, and Ant Financial acquired a share of food-delivery app, Zomato, to gain a foothold in the market. China first laid claim to India’s e-commerce market through an investment in financial tech start-up, Paytm.

Not everyone is of the same mind, with regard to Flipkart’s future growth. Tencent, Microsoft and Tiger Global Management will remain Flipkart investors. However, Japan’s nearly $100 billion SoftBank Vision Fund will be cashing out.

It was SoftBank CEO Masayoshi Son that let the news of the deal, which is still subject to regulatory approval, slip on May 9 during an earnings presentation. The Japanese technology group invested $2.5 billion in Bangalore-based Flipkart last year. Son said the sale to Walmart valued SoftBank’s stake at $4 billion, suggesting a bumper return of 60%.

Despite China’s strides into the Indian e-commerce market, American companies’ efforts have dominated headlines the last few years.

After Walmart began talks with FlipKart, initially seeking a minority stake, Amazon tried to cut in. In December, the Seattle-based e-commerce monolith attempted to purchase FlipKart outright, according to the New York Times.

Many see the deal as a blow to Amazon, which will now have to compete with its American soil rival via its existing platform in the region, Amazon India, in the fastest growing economy in the world.

Amazon CEO Jeff Bezos has committed to investing at least $5 billion in his company’s India business, saying in 2016 that he saw “huge potential” in the country, CNN reported. Amazon has introduced its Prime video and music services in India in its effort to challenge Flipkart, as well as its annual Prime Day blockbuster sale.

 

 

Many see the deal as a blow to Amazon, which will now have to compete with its American soil rival via its existing platform in the region, Amazon India, in the fastest growing economy in the world.

 

 

Flipkart was founded in 2007 by two former Amazon employees, Sachin Bansal and Binny Bansal, who are not related.

In a Facebook post, Flipkart executive chairman Sachin Bansal confirmed that he’s leaving the company after 10 years, while Binny Bansal is staying on as an investor. Neither Walmart nor Flipkart would say how large Sachin Bansal’s stake was, or to whom he sold it, CNN reported.

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