Walmart buys majority stake in Flipkart

11 May, 2018, 02:05 | Author: Salvatore Jensen
  • Flipkart-Walmart deal an incredible outcome for the company's believers Paytm's Vijay Shekhar Sharma

Shares of Walmart fell 3 percent. Walmart also plans to add 50 new cash-and-carry stores in the next four to five years.

This week, Walmart successfully pulled ahead of Amazon in the race for the top grocery spot in one of the fastest-growing markets in the world after announcing it has signed definitive agreements to become the largest shareholder in Flipkart.

RSS affiliate Swadeshi Jagran Manch has alleged that U.S. retail giant Walmart was "circumventing" rules for a "back-door entry" into India with its U.S. $16 billion majority stake acquisition of Flipkart and sought Prime Minister Narendra Modi's intervention to safeguard "national interest".

Walmart expects the deal to help set it up "for growth and profits in the future", CEO Doug McMillon said during a call with investors. McMillon has led Walmart's efforts to boost global business. Walmart and Flipkart will remain separate brands and the Indian e-commerce company will have an independent Board, which will be revamped to give representation to the U.S. firm.

What do the world's largest retailer Walmart and India's largest online marketplace have in common? "It is really about grabbing an opportunity after waiting on the sidelines in a growth market for over a decade", he said.

Krish Iyer, Walmart India's president and CEO, on Thursday told Press Trust of India: "We now have 21 stores and plan to open 50 stores in four to five years".

"Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart", said Judith McKenna, president and chief executive officer of Walmart International. It is also reportedly looking to sell part of its Brazilian operations.




Global business contributed less than a quarter to the retailer's total revenue of $500 billion (roughly Rs. 33.6 lakh crores) in fiscal 2018.

The Confederation of All India Traders (CAIT) have said the deal is nothing but a clear attempt to control and dominate the retail trade in India by Walmart through e-commerce in the long run.

Jaideep Hansraj, CEO, wealth management and priority banking at Kotak Mahindra Bank, said that while the allocation of funds will depend on the investment profile of the individuals and their risk appetite, the equity allocation should ideally be 100 minus the person's age; lower the age, higher the equity allocation.

Walmart said it remains in talks with other potential investors to join the funding round. Shah also reiterated that considering that the average age of most professionals is below 40, they could consider starting their own businesses or back startups or start their own VCs, deploying the balance money make "risk-adjusted returns" to maintain their lifestyle. 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.

Sachin Bansal's decision to exit Flipkart after its takeover by Warlmart was a "very emotional moment", said the company's co-founder Binny at a select media briefing today. This had helped sellers on Flipkart's platform in their global sales.

Chittaranjan Mohanty, an alumnus of Xavier Institute of Management, Bhubaneswar (XIMB) who now runs an online vegetable delivery start-up, Hi Fresh, is all praise of Flipkart's business model and feels the deal will inspire budding entrepreneurs. Walmart's long-term corporate credit rating was affirmed at "AA", S&P said.

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