IT

Its official! Walmart buys Flipkart in world's largest ecommerce deal

Its official! Walmart buys Flipkart in world's largest ecommerce deal

India's hot economy makes it attractive to companies eager to sell goods to its massive population. With this deal being hammered down, the total worth of Flipkart's employee stock ownership plans (ESOPs) has jacked up. But, he adds that going forward, numerous leadership positions at Flipkart will be replaced by Walmart and that the United States company will get its own people to take up these roles within the next 18-24 months. It's a move that might have near-term losses but is part of a larger shift by Walmart to look toward the future.

Singapore's Allen & Gledhill, Dentons Rodyk & Davidson (an affiliate of Dentons in Singapore) and India's Khaitan & Co and Cyril Amarchand Mangaldas are also advising Flipkart on its deal with Walmart.

In 2017-18, Flipkart recorded gross merchandise value of $7.5 billion and net sales of $4.6 billion - a 50 per cent year-on-year growth. That's a fraction of Walmart's latest annual revenue of $485.8 billion.

The acquisition of the majority stake makes the $500-billion Walmart the largest shareholder of Flipkart group and will help accelerate its mission to transform e-commerce through digital technology. They are selling their shares in a Singapore-based company - Flipkart Pte Ltd, which owns an Indian company - to a non-resident (US) company, Walmart.

As it turned out, the rise of heavily-financed competitors such as SoftBank-backed Snapdeal, Alibaba-backed Paytm and Amazon put paid to any such hopes of a quick road to profitability for Flipkart. Sachin and Binny founded Flipkart in 2007 as an online bookstore. The acquisition is Walmart's biggest foreign investment ever and also one of the most successful exits by an Indian startup.

Besides, "it is much more hard for the government to control and regulate foreign owned platforms particularly in e-commerce sector which has no boundaries", Khandelwal said.

Amazon had been considering making its own offer for the Indian firm, which has more than 100 million users.




Besides now operating 21 cash and carry stores in India, Walmart made a dash to acquire several ventures including Jet.com, Shoebuy and Bonobos in the recent past.

But the Confederation of All India Traders has warned that the Flipkart-Walmart tie-up could kill off small businesses by undercutting them.

Walmart will pay approximately $16 billion for an initial stake of approximately 77 per cent in Flipkart, subject to regulatory approval in India.

The deal hasn't gone down well with the tens of millions of small store owners who for years used political muscle to slow the arrival of global retailers.

"The deal indicates attractiveness of India's consumption market for global majors. we expect greater thrust on the online grocery segment", said rating agency Crisil Research director Ajay Srinivasan in a statement here.

Recognising the challenges but also identifying the opportunities, Accel eventually chose to invest in Flipkart out of its $65 million seed and Series A fund. Although Amazon opposes, Walmart has kept his decision. Pratap and his co-founders have built the technology that powers much of the gifting and gift-card solutions used by India's largest retailers. While the first phase was dominated by hyper-competition, extreme growth and the battle for gaining market share at any cost, it also led to a lot of players betting on wrong business models. In Chile, it worked closely with suppliers to coax them into its way of doing business.


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