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Walmart also plans to pump $2-3 billion (over Rs 13,000 crore) as fresh equity into Flipkart to strengthen its hold on the e-commerce firm.
Earlier in the day, SoftBank — the largest investor in the e-tailer — confirmed that Walmart-Flipkart agreement was made on Tuesday night (Japanese time), when it would have been afternoon in India.
Rival Amazon too was reportedly in the race to acquire Flipkart, but the Indian online retailer went for the deal offered by Walmart.
According to analysts, the deal is the world’s biggest-ever e-commerce acquisition and would pit Walmart head-to-head against Amazon in one of the world’s fastest growing markets. As the e-commerce battle in India hots up even further with this latest development, Amazon in the meantime, has pumped Rs 2,600 crore into its main India unit — Amazon Seller Services — taking the total capital infusion into the entity to over Rs 10,750 crore in a little over a year.
E-commerce sales in India hit $21 billion last year, according to market research company Forrester and are expected to soar as more people make greater use of internet access.
Flipkart sells everything from mobile phones, television sets, juicers to running shoes, sofas and beauty products. Amazon too has a similar range of product offering.
Walmart CEO Doug McMillon arrived in Bengaluru to make the announcement of the deal. The US retail giant is likely to bring its managerial expertise, although the existing leadership in Flipkart is expected to stay as they “understand the market well”. Currently, Walmart India owns and operates 21 stores under the cash-and-carry system in nine states across the country.
There had been months of speculation that Walmart was preparing to buy Flipkart but both had repeatedly declined to comment on the talks.
Japan’s SoftBank is currently the largest investor in Flipkart with a 23-24 per cent stake, along with early backer South African media and internet giant Naspers, which holds 13 per cent. Other investors include New York-based hedge fund Tiger Global, US private-equity firm Accel Partners, China’s Tencent Holdings Ltd, eBay Inc and Microsoft Corp.
In terms of financial statistics, Flipkart Group’s consolidated loss attributable to owners of the company in fiscal 2017 widened to Rs 8,770 crore, from Rs 5,216 crore a year earlier. Consolidated revenue jumped 29 per cent to Rs 19,855 crore in fiscal 2017.
Flipkart was founded 11 years ago in 2007 by IITians Sachin Bansal and Binny Bansal from a two-bedroom apartment in Bengaluru’s Koramangala area as an online bookstore. Although they share the same last name and come from Chandigarh, the two Bansals are not related. A batch apart in IIT-Delhi, they became friends while working together at Amazon and decided to start Flipkart.