Walmart Inc today announced acquisition of 77 per cent stake in Flipkart for about USD 16 billion (Rs 1.05 lakh crore) in the largest e-commerce deal which will give the US retailer access to the Indian online market that is estimated to grow to USD 200 billion within a decade.
The deal, under which co-founder Sachin Bansal and Japan's Softbank Corp Group are exiting, values Flipkart at USD 20.8 billion. It is the biggest M&A deal in India this year.
"Walmart's investment includes USD 2 billion of new equity funding, which will help Flipkart accelerate growth in the future," the US-based firm said in a statement.
They "are also in discussions with additional potential investors who may join the round, which could result in Walmart's investment stake moving lower after the transaction is complete", the statement added.
"Even so, the company would retain clear majority ownership," Walmart said.
Google parent Alphabet Inc is seen to be the potential investor who may get as much as 15 per cent.
Reacting to the deal, RSS affiliate Swadeshi Jagran Manch has alleged that Walmart was "circumventing" rules for a "back-door entry" into India, and sought Prime Minister Narendra Modi's intervention to safeguard "national interest".
Flipkart will get additional capital and expertise to battle Amazon, which has spent billions of dollars to gain customers in the country. Flipkart has 34 per cent market share while Amazon controls 27 per cent of India's online sales.
Binny Bansal, who had co-founded Flipkart with Sachin 11 years ago, will retain some of his 5.5 per cent stake in India's biggest online retailer and will be Chairman of the company's Board. Kalyan Krishnamurthy will continue to be the CEO of the Bengaluru-based firm.
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 US firm.
Tencent Holdings Ltd, Tiger Global Management and Microsoft Corp will also continue to remain shareholders in Flipkart, Walmart said without divulging their stake.
Japan's SoftBank Group Corp sold its 20 per cent stake, which it had acquired for USD 2.5 billion, for about USD 4 billion. South African internet and entertainment firm Naspers, which had invested USD 616 million in Flipkart in August 2012, sold its entire 11.18 per cent stake in the company to Walmart for USD 2.2 billion.
"While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart's ambition to transition into a publicly-listed, majority-owned subsidiary in the future," it said.
Pre-deal, Tiger Global Management held about 20 per cent stake in Flipkart.
The deal is subject to regulatory approvals including Competition Commission of India, and is expected to close later this year.
The deal will help the US retail giant -- which has seen consumers migrate to online platforms like those run by Amazon -- get a vantage position in e-commerce space in the world's fastest-growing economy.
Only 14 per cent of its over 400 million Internet users shop online and the number is projected to rise to over 50 per cent by 2026.
The deal would bring over 175 million users to Walmart, which has been eyeing the Indian market for a few years. So far it had been handicapped by India's retail policy that does not allow overseas companies to sell directly to consumers (except in wholesale cash-and-carry segment).
Companies like Flipkart and Amazon operate as e-commerce marketplaces a segment that allows 100 per cent foreign direct investment (FDI).
Walmart runs 21 Best Price wholesale stores in the country that sell everything from fast-moving consumer goods to furniture to other retailers and institutions. It could potentially use those Best Price stores as pickup and delivery points.
"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 the transformation of e-commerce in the market," said Doug McMillon, Walmart's president and chief executive officer.
Walmart investment, he said, will benefit India by providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers, and women entrepreneurs.
Soon after signing the deal, McMillon addressed Flipkart employees in Bengaluru and would meet key policy makers here tomorrow to clear any misgiving about the deal.
Binny Bansal said Walmart is the ideal partner for the next phase of Flipkart journey.
Amazon was also said to have put in an aggressive offer to buy 60 per cent of Flipkart but the board of the Indian firm is said to have favoured the Walmart offer.
Launched in 2007 and envisioned as the 'Amazon of India' before the latter came to India, Flipkart owns country's largest online fashion retailers -- Myntra and Jabong -- both of which it had acquired.
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