Walmart Invests $16 Billion in Flipkart

Flipkart Chart2

"While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkarts ambition to transition into a publicly-listed, majority-owned subsidiary in the future", it said. The buyout also reinforces the scope of big exits in India for sector leaders like Flipkart and becomes a feather in the cap for its investors, especially at a time when profitable exits in terms of mergers and acquisitions have been far and few and IPOs, next to none."This will bring some confidence in the Indian market on the possibility of getting good returns".

What is interesting though is that all this action in the e-commerce space has made a mockery of India's rules against Foreign Direct Investment in retail; although those were nothing but crude protectionism in the first place. While the first phase was dominated by hyper-competition, extreme growth and the battle for gaining market share at any cost, it also led to a lot of players betting on wrong business models.

"Walmart executives cast the largest acquisition in its history as a long-term play in a market with a rising middle class and plenty of room for growth in mobile adoption, e-commerce and retail overall".

With US retailer Walmart Inc's acquisition of 77 per cent stake in Flipkart for about Dollars 16 billion, the 11-year old Indian e-commerce firm also took a decision to part ways with its co-founder Sachin Bansal, who along with Binny Bansal founded the company in 2007.

"Digitally powered e-Walmart will certainly vitiate the e-commerce and retail market".

"Walmart is still a distant second in what we see as a two player omni-channel race in the United States market", Gutman said.

"The owner can dictate anything".

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Traders say they are most concerned about predatory pricing and steep discounting by e-commerce firms with deep pockets thanks to foreign funding that could edge out smaller rivals.

However, a deal done on paper is still subject to regulatory approvals.

Flipkart is India's largest e-commerce marketplace. The association of India asked the government to take strong steps to ensure adherence to FDI policy.

Walmart India offers close to 5,000 items through its cash-and-carry wholesale format.

With 54 million active users across Flipkart's various platforms, and some $7.5 billion in annual gross merchandise volume (GMV), it's clear why Walmart saw Flipkart as an attractive target to build market share in India.

A day after USA retail giant Walmart struck its largest deal with a big ticket investment in Indian online marketplace Flipkart, a right-wing Hindu group that fears small traders will suffer staged a protest in New Delhi calling for the deal to be scrapped.

But when Amazon and Walmart duel for control of Indian retail market in coming days, it would be hard for the Modi government to maintain status quo on the policy front. Walmart and Flipkart are also in discussions with additional potential investors who may join the round, which could result in Walmart's investment stake moving lower after the transaction is complete. "There will be cent per cent rise in Flipkart's brand value with the brand becoming more credible", said an expert from the authenticity.

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