Walmart acquires 77% stake in Flipkart for $16 Billion : Top developments

Amazon founder Jeff Bezos has committed investments to the tune of $5 billion for the Indian market

Walmart was upstaged earlier Wednesday when Masayoshi Son, chief executive officer of SoftBank Group, confirmed during a briefing in Tokyo that the US retailer had agreed to buy control of Flipkart.

Binny Bansal said Walmart is the ideal partner for the next phase of Flipkart journey as he saw e-commerce having great potential to grow from its current status of being a relatively small part of retail in India.

Walmart said its investment included $2bn of new equity funding, which will be used partly to fund an expansion into online grocery sales, according to a person close to the deal. It also plans to use newly issued debt to help finance the deal, which prompted S&P Global Ratings to switch its AA outlook on Walmart to negative from stable.

The Vision Fund had invested close to $2.5 billion in Flipkart via primary and secondary share purchases a year ago.

Amazon's bid was reportedly for a 60% stake in Flipkart for an undisclosed sum, and also called for a non-compete agreement with the company's founders.

Of the Bansal duo, Sachin Bansal is exiting the company by selling off his stake, while Binny Bansal will remain with the company.

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Walmart buys 77% percent stake in Flipkart for $16 billion. Binny Bansal, who co-founded Flipkart along with Sachin Bansal in 2007, will meanwhile stay on as the group CEO. In less than a year, the company is now seeking to sell its Flipkart stake for $1.1 billion.

Last year, eBay had invested over $500 million for a stake in Flipkart, and had sold its India business to the latter. It also thrusts Walmart into one of the world's fastest-growing economies - with more than 1.3 billion people - establishing India as the latest battleground between Walmart and Amazon in the global e-commerce wars. And even beyond the immediate payoffs, Walmart's growth in India through Flipkart should accelerate for years.

"It is not so much about succeeding in India for Walmart because that may or may not happen", Neil Stern, senior partner at retail consultancy McMillan Doolittle told Reuters. Walmart's local business runs 21 Best Price cash-and-carry stores and a fulfilment centre that supports 19 cities across nine Indian states.

Indian retail's deal counter will keep buzzing.

"As Flipkart is expected to generate meaningful losses for at least the next few years, this is clearly an investment for the future", Moody's analyst Charlie O'Shea wrote in a note. Together, Flipkart-Myntra-Jabong hold 70 per cent market share of the online fashion business in India. It's a huge step for both, in addition to the e-commerce sector in India as a whole.

Walmart's growth strategy in India has been hampered by tough regulations that bar foreign investment in multi-brand retail, which is why it started discussions with Flipkart nearly two years ago. With the integration of Jet in the USA well under way, Walmart has gotten better at rolling out new changes and incorporating these lessons into the core business.

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