Walmart Acquires Flipkart For $16 Billion In World’s Largest E-Commerce Deal!

In a surprise move, Walmart's acquisition of Flipkart is also back by Google who has brought in $1.5 billion for a 7 percent stake in the e-commerce company.


Walmart Acquires Flipkart For $16 Billion

After months of speculations and uncertainties, we had reported some days ago that the Walmart-Flipkart megadeal was almost finalised. Today, Walmart has formally announced Flipkart’s acquisition where they have paid $16 billion for a 77 percent stake in one of India’s largest e-commerce companies. With this acquisition, Walmart will face-off with Amazon in India, who is also one of their biggest rivals back home in the US.

This is, by far, the world’s largest e-commerce deal. Even Amazon was in the race for buying Flipkart and was ready to offer $2 billion dollars as a breakup fee to get Flipkart to the negotiating table. But, in the end, it was Walmart who ended up the winner in this race. Walmart and Amazon share a fierce rivalry back home.

In a surprise move, Walmart’s acquisition of Flipkart is also back by Google who has brought in $1.5 billion for a 7 percent stake in the e-commerce company.

So, what happens to Flipkart now?

Walmart Acquires Flipkart After Intense Competition

Until up to a few days ago, it seemed that both, Amazon and Walmart, were equally in the race to acquire the prized jewel of the Indian e-commerce. In fact, even the existing investors in Flipkart, Tiger Global Management, Accel Partners, Naspers and IDG Ventures were not in favour of Walmart taking over Flipkart and were ready to make an exit if the eventuality came to pass.

Flipkart has an active user base of around 100 million users and it is already the leading e-commerce platform in the country. With online success, it is also looking to have a big offline presence. Walmart, which already has an online-offline business model in the US, is expected to help Flipkart with their offline ambitions.

Doug McMillon, who is Walmart’s President and Chief Executive Officer, has said in a statement,

“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,”

The other investors and stakeholders in Flipkart, Tencent, Tiger Global and Microsoft are expected to stay on. McMillion further said in a statement,

“We are confident this group will provide Flipkart with enhanced strategic and competitive advantage. Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”

Changes At Flipkart

After the deal has gone through, there are going to be some changes at Flipkart, with a major one being co-founder Sachin Bansal’s exit from the company. Also, as a part of the deal, Binny Bansal will reduce his holding by about 10 percent which will bring down his holdings from the current 5.1 percent to about 4.5 percent. Binny Bansal will also take over as the new Executive Chairman and Group CEO at Flipkart which means that he’ll also head Myntra, Jabong and PhonePe.

Flipkart’s newest executive chairman and group CEO has said,

“This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India,”

As a part of the deal, Walmart will also bring in $2 billion of new equity funding which will help Flipkart in their future business ambitions.

As of March 31, 2018, Flipkart has recorded a Gross Merchandise Value of $7.5 billion and has net sales to the tune of $4.6 billion, making it a serious player in the e-commerce space and a valuable acquisition. Walmart’s acquisition has pushed the homegrown startup’s valuation to $20.8 billion from the $18 billion prior to the takeover.

What Does This Mean For E-Commerce In India?

The competition in the Indian e-commerce space is only going to intensify.

Adrian Lee, Research Director at Gartner says,

“I see the competition getting more aggressive as Amazon counteroffers Walmart for a stake in Flipkart. Both have their own sizeable cash reserves, and the outcome in India will determine the access to its growing middle class consumers for dominance, outside of the US,”

Amazon Founder, Jeff Bezos, has already committed to investing $5 billion in India to make Amazon the largest e-commerce platform in the country. On the other hand, Flipkart has made a stunning recovery after its valuation was reduced to just $11 billion from $15 billion, in 2016. As an added feather to its cap, Flipkart’s mobile app has been declared as the best app under the ‘Standout Build for Billions Experience’ category at the Google Play Awards at Google I/O 2018.

All-in-all, this deal is expected to boost the e-commerce platform in the country. With competition intensifying, Indian consumers may soon see some exciting deals and offers which will be a direct result of the largest e-commerce acquisition in the world.

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