Walmart outbids Amazon for India’s Flipkart
Walmart announced today that it has signed a definitive agreement to become the largest shareholder in Flipkart. With an offer of $16 billion, Walmart outbid Amazon.com, which was rumored to have made an offer of $15 billion for the Indian e-tailing giant.
Subject to regulatory approval by Indian authorities, Walmart will own a 77 percent stake in Flipkart, which will become an independently-operated subsidiary of the retailer. The plan is for Flipkart to eventually go public with Walmart maintaining its majority stake.
“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 e-commerce in the market,” said Doug McMillon, Walmart’s president and chief executive officer, in a statement.
“While eCommerce is still a relatively small part of retail in India, we see great potential to grow,” said Binny Bansal, Flipkart’s co-founder and group chief executive officer. “Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore.”
Flipkart, which was founded in 2007, is credited with a strong logistical operation as well as one with deep insights into the needs and wants of Indian consumers. The company’s supply chain division, eKart, makes 500,000 deliveries on a daily basis to more than 800 cities in India. The company reported net sales of $4.6 billion for its last fiscal year, a more than 50 percent increase.
Walmart India will continue to operate as an independent entity. The company operates 21 Best Price cash-and-carry stores and one fulfillment center in the country.
The deal for Flipkart follows the announcement last month that J Sainsbury Plc agreed to acquire Walmart’s Asda division in the U.K. Walmart, which acquired Asda in 1999, will own roughly 40 percent of the combined company.
In an email to RetailWire, Moody’s lead retail analyst Charlie O’Shea said the credit ratings firm viewed the Flipkart deal “favorably as it provides Walmart with immediate scale in the burgeoning Indian e-commerce arena.”
While noting that “Flipkart is expected to generate meaningful losses for at least the next few years,” Mr. O’Shea, added, “This is clearly an investment for the future, and when viewed in tandem with the recently-announced sale of a majority stake in Asda, is indicative of Walmart’s long-standing strategy of shifting resources into higher growth potential markets and segments when opportune.”
- Walmart to Invest in Flipkart Group, India’s Innovative eCommerce Company – Walmart
- Walmart Takes Control of India’s Flipkart in E-Commerce Gamble – The New York Times
- Sainsbury and Walmart’s Asda to create grocery powerhouse – RetailWire
DISCUSSION QUESTIONS: What will Walmart’s stake in Flipkart mean for the two companies going forward? Will control of Flipkart have a measurable impact on Walmart’s competition with Amazon?