After the initial talks of Walmart investing in Flipkart were about to go off the table due to stake-distribution issues, the largest stakeholder in the homegrown e-commerce firm SoftBank has finally agreed to negotiate with Walmart. The Japanese investment major is ready to go off a major part of its shareholding, allowing world’s largest brick-and-mortar retailer to make an $8-10 billion investment in the Indian company.
Walmart is all set to pick up a majority stake in the Indian e-commerce firm after SoftBank has agreed to part-sell its 23-24 percent stake in Flipkart. The Japanese firm invested $2.4 billion in Flipkart last year in August, and have already taken back around $2 billion in gains on its investment.
Walmart will be buying around 20-26 percent stake in Flipkart which will increase its overall shareholding to 51 percent in tranches. Here are five important things you need to know about the Walmart-Flipkart investment —
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Flipkart Will Become The Fourth Most-Valued Startup In The World
The total valuation soared to $14.2 billion last year after Flipkart managed to raise a major sum from SoftBank in August. The proposed Walmart investment will take Flipkart over $20 Billion valuation mark, making it the fourth most valued startup in the world, after Uber, Airbnb and WeWork.
The primary investment will value at around $20-22 billion, which is a 100 percent rise from the $10.2 billion valuations from last year in April after the Indian company raised funds from Chinese internet giant Tencent.
Major Investors Will Exit Flipkart
Tiger Global has a 20 percent stake in Flipkart, while South African media and internet giant Naspers owns around 13 percent. Founders Binny and Sachin Bansal have around 10 percent, and other key holders are China’s internet giant Tencent, online auction site eBay, Microsoft, venture capital funds like Accel Partners and Japanese investment major SoftBank.
Most of the investors will be paring down their stake or will completely exit the scene as Walmart comes on board with Flipkart.
The Anti-Amazon Alliance
The largest offline retailer in the world, Walmart is trying to build an anti-Amazon alliance with Flipkart to take on the e-commerce giant globally. For Walmart, the deal with Flipkart is going to be its last big opportunity to give Amazon a hands-on fight.
Back at home, the US-based retailer has been beaten a number of times by the Jeff Bezos-led Amazon. Walmart seems to be wanting to take on Amazon on the global turf, by teaming up with its largest rival in India, Flipkart.
The Big Online-Offline Fight
The Walmart deal will give Flipkart the much-needed offline push, where the e-commerce firm can get into an omnichannel business model. On the other hand, Walmart will get a massive online exposure with its investment in Flipkart.
In the past, Walmart has aggressively lobbied the Indian government for an open market in the country for foreign retailers. Amazon India also aims to lead the Indian retail industry, in both offline and online spaces, which is expected to reach $1.3 trillion by 2020.
Boom For Indian e-Commerce Industry
The investment from Walmart will is going to be one of biggest global fundings till date. It will give the Indian e-commerce industry a big push. Amazon is heavily investing in India, as it plans to conquer the Indian market. But, the upcoming Walmart investment will provide Flipkart with the opportunity to take on Amazon more aggressively.
Flipkart also reported that it has currently contributed around 15 percent of the overall gross merchandise volume (GMV) in the country.