Walmart buys 77% stake in Flipkart: 10 things to know

NEW DELHI: US retail giant

Walmart

has picked up 77 per cent stake in Indian e-commerce player Flipkart for $16 billion. Ahead of the official announcement, TOI had accurately reported the deal size. This is the boldest bet of Walmart in India.


"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 eCommerce in the market," said Doug McMillon, Walmart’s President and Chief Executive Officer (CEO).

Earlier in the day, SoftBank -- the largest investor in the e-tailer -- confirmed that Walmart-Flipkart agreement was made on Tuesday night (Japanese time), when it would have been afternoon in India. SoftBank CEO Masayoshi Son made the announcement on Wednesday afternoon.

Analysts say it would be the world's biggest-ever e-commerce acquisition and pit Walmart head-to-head against rival Amazon in one of the world's fastest growing markets.

Here are 10 things to know about the deal:

1. Walmart also plans to pump $2 billion (nearly Rs 13,000 crore) as fresh equity into Flipkart to strengthen its hold on the e-commerce firm.

2. Sachin Bansal, Flipkart’s co-founder and its CEO for nine years, is exiting the company by selling his entire 5.5 per cent stake to Walmart.

3. A person familiar with the Flipkart-Walmart talks said, “Binny Bansal will stay on as the group CEO and will be additionally appointed as the new executive chairman of the Bengaluru-based e-tailer.”



4. Other than Walmart, the remainder of the business will be held by some of Flipkart's existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp.

5. Sources said Walmart’s plan entails broadening its online presence in the country and link up with 5-6 million kirana stores to help them modernize and be part of the overall supply chain that the US giant wants to establish.

6. “There will be large investment in technology both on digital payments front as well as other areas,” said a source with direct knowledge of the company’s future plans.

7. Walmart is likely to bring its managerial expertise, although the existing leadership in Flipkart is expected to stay as they “understand the market well”.

8. Walmart India owns and operates 21 stores under the cash-and-carry system in nine states across the country.



9. It also has a global sourcing centre in Bengaluru and a technology centre, which employs 1,200 engineers. The sourcing centre procures non-food products from domestic companies for over a dozen global markets.

10. Analysts said they expect a large chunk of the fresh investment in strengthening back-end infrastructure. They said with acquisition of Flipkart, Walmart will be able to extend its expertise in managing physical goods in the digital space.

(With inputs from agencies)