Ending weeks of back and forth, Walmart confirmed it is making a $16 billion investment in Indian ecommerce marketplace Flipkart, giving it a 77% stake, increasing its presence in the rapidly growing market and edging out a bid from rival Amazon.
Amazon’s bid was reportedly for a 60% stake in Flipkart for an undisclosed sum, and also called for a non-compete agreement with the company’s founders. A source told Reuters that the presence of Amazon did not drive up the price of Flipkart.
Walmart’s acquisition of Flipkart dwarfs the $3.3 billion it paid for Jet.com in 2016 and is the largest in the space to date. It is expected to value Flipkart, India’s largest ecommerce company with 54 million active users, at $20.8 billion when it closes later this year, subject to regulatory approval.
The entrance of Walmart, with its massive scale, resources and logistics prowess, will certainly keep Flipkart way ahead of struggling competitor Snapdeal – which walked away from a Flipkart merger last year – and threaten to swamp many smaller Indian ecommerce players.
Like Amazon until recent years, Flipkart – which also started out selling books, in 2007 – has operated in the red despite massive growth, with net losses increasing by 68% in 2017.
The other shareholders in Flipkart include co-founder Binny Bansal – who may exit the group – Tencent Holdings Limited, Tiger Global Management LLC and Microsoft. Walmart said it “supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.”
Walmart’s press release alluded to the possibility of other investors reducing its stake. Reuters has reported that Google parent firm Alphabet may acquire a 15% stake in Flipkart for $3 billion.
“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 ecommerce in the market,” said Doug McMillon, Walmart’s president and CEO in the release. “As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market.”
As it ramps up in India, Walmart is scaling back in other markets. In 2016 it sold its selling its Yihaodian subsidiary to Alibaba rival JD.com. At the same time, Walmart is using JD.com as a storefront to Chinese consumers. More recently, it sold a majority stake in its Asda subsidiary in the UK to grocery chain Sainsbury in April, according to TechCrunch.