Walmart Flips C(K)art; deal to rake in one of the largest FDIs in India

The world’s largest retailer Walmart has agreed to buy 77 per cent stake in Flipkart Group for $16 billion. Flipkart co-founder Binny Bansal and other shareholders will hold the remainder. The deal will bring one of the largest foreign direct investments in the India.

The deal gives Walmart greater access to India’s e-commerce market, which Morgan Stanley has estimated will grow to $200 billion in about a decade. Earlier Wednesday Masayoshi Son, chief executive officer of SoftBank Group, had confirmed during a briefing in Tokyo that the US retailer had agreed to buy control of Flipkart. SoftBank invested $2.5 billion in the Indian company and that stake will be worth about $4 billion in the deal, Son said.

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“Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America’s Walmart,” SoftBank CEO Masayoshi Son, whose firm owns a 20 per cent stake in Flipkart told agencies.  Softbank is Flipkart’s single largest investor.  Flipkart is the first billion-dollar Indian e-commerce company, Flipkart and sells 8 million products across 80-plus categories. It has 100 million registered users.

Five things to know about the deal

  1. Japan’s SoftBank Group Corp owns a fifth of Flipkart through its Vision Fund. Other major investors in Flipkart include Tiger Global, Naspers and Accel while the Bansals – Sachin and Binny – own just over 5 per cent each of the company, according to reports.
  2. Last year, Kalyan Krishnamurthy, previously an executive in Flipkart investor Tiger Global, took over as Flipkart CEO. Binny Bansal became CEO of the whole group, which includes fashion portals Myntra-Jabong, payments unit PhonePe and logistics firm Ekart.
  3. Flipkart controls nearly 40 per cent of India’s online retail market, according to researcher Forrester.
  4. Flipkart, which is competing with Amazon.com Inc for market share in India’s e-commerce market, gained online fashion market dominance with the 2014 acquisition of Myntra, which subsequently bought rival Jabong.
  5. Meanwhile, Amazon – Flipkart’s biggest rival in India – has committed to invest over $5 billion in India. Amazon’s founder Jeff Bezos told shareholders in a recent letter that Amazon India is the fastest growing marketplace in the country. He said Amazon added more members to its Prime loyalty programme in India in its first year, than any previous geography in Amazon’s history.

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