Earlier on Wednesday, Walmart said it had agreed to buy 77% of Flipkart for $16 billion, valuing India’s largest e-commerce firm at roughly $21 billion. Sachin Bansal was the co-founder and CEO at Flipkart for nine years. The Flipkart model would help the bricks-and-mortar retail giant to take on its global rival Amazon.
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Judith added, “This investment aligns with our strategy and our goal is to contribute to India’s success story, as we grow our business”. The deal is expected to close by the end of 2018.
Walmart’s stock, which fell as low as 82.13 on the news Wednesday, were recently off 3.8 percent at $82.50. The deal will shave 25 cents to 30 cents per share from this year’s earnings, with that impact doubling the following year.
The Vision Fund had invested close to $2.5 billion in Flipkart via primary and secondary share purchases a year ago.
“We’ve been looking at this business for some time. And it fits right in with our strategy”, Judith McKenna, Walmart’s worldwide chief executive officer, said in a phone interview.
An approval regarding an agreement to sell about company’s 75 percent to Walmart for approximately $15 billion is given out by the board of Flipkart Online Services Pvt. As a result of this deal, FlipKart will now be worth $20 billion.
This will be Walmart’s second attempt to get into India’s retail market.
It now runs 21 wholesale stores in the country.
Walmart’s investment includes $2 billion in new equity funding, which the companies say will be used to spur Flipkart’s growth. “While Walmart and Flipkart will leverage the combined strengths of both companies, they will maintain distinct brands and operating structures”, Walmart said in a statement. But Walmart appears to have carried the day, in part by promising that it would continue to support Flipkart’s ambition to eventually be listed as a separate, publicly traded subsidiary. This is a defining moment not only for startups and entrepreneurs but the entire Indian venture capital community and for global investors. It would also give a chance to build its online reputation. Amazon has been aggressively making expansions in the country. Last year, Flipkart offered to buy Snapdeal, but they failed.
Launched in October 2007, Flipkart is India’s largest e-commerce marketplace.
Shares of Walmart Inc. dropped more than 5 percent before the opening bell.
The combined entity’s manufacturing footprint covers five continents with products sold in over 150 nations with a stronger presence in the US, India, Asia, South Africa, CIS & Russia and Latin America.
With more than 400 stores in China and a partnership with online site JD.com, Walmart is “well-penetrated” in China. In the US Walmart lost to Amazon, but with the Flipkart deal it hopes to keep itself competitive in the e-retail space. Last month, the company consolidated all its Bengaluru offices in one large campus. However, Walmart has also indicated that it won’t be selling much for now and will like to retain the majority control.
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Binny Bansal, Flipkart’s co-founder and group chief executive officer, said the deal “is of enormous 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”.
