Walmart Set to Announce Flipkart Deal Today
- Author: Latoya Cobb May 11, 2018,
May 11, 2018, 3:58
Walmart for its part is promising to provide hundreds of jobs in India, work with kirana owners to modernize their practices, support small businesses, join hands with farmers, and lend a hand to Make in India projects.
Things are right now moving at a fast pace, with doubt and apprehensions all over. "Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart", said Judith McKenna, president and chief executive officer of Walmart International.
But while the deal appears to be further confirmation that India may be seen as the next big emerging market for internet retailers, the move has still been seen as a gamble by some.
E-commerce sales in India hit $21 billion (roughly Rs. 1.41 lakh crores) previous year according to market research company Forrester, and are expected to soar as its population of 1.25 billion people make greater use of internet access. The deal has changed the retail landscape in the country as the world's biggest offline retail company has acquired India's biggest online retailer. A secondary sale was generally frowned upon, being termed as a gamble and a chance. In its projections, Walmart has indicated that it expects Flipkart's operating losses to nearly double from its fiscal 2017 level of Rs 4,586 crore to Rs 9,111 crore by fiscal 2020.
Co-founder Sachin Bansal has accepted approximately $1 billion for his 5.5% stake in the venture he co-founded 11 years ago with Binny Bansal. Wal-Mart's offer includes $2 billion in equity financing that will go toward fueling the continued growth of the e-commerce company.
McMillon is expected to outline its India strategy to Flipkart's employees.
Its largest American competitor, Walmart, may have just captured as many new customers in India alone. Although Flipkart is now the market leader, Amazon's Indian site, which only launched in 2013, is catching up quickly. Paytm with the backing of Alibaba has the potential to become the wild-card, and disrupt the equations.
The long-rumored deal will see Walmart Inc. nab a 77 percent stake in Flipkart Private Ltd. Walmart will be. It is also the biggest M&A deal in India this year. Sachin Bansal and Binny Bansal, the two IITians who are completely unrelated to each other, started Flipkart's journey way back in 2007 in an unassuming 2BHK home in Bengaluru.
And finally, the last laugh will be of Indian consumers.
"For Walmart, this is the only way left to enter the Indian market and they are paying a premium for the access", said Satish Meena, a Forrester analyst based in New Delhi. The Walmart deal made them billionaires.
"Though the focus will be on serving customers and growing the business, Walmart supports Flipkart's ambition to transition into a publicly-listed, majority-owned subsidiary in the future", the statement said.