The giant US retailer Walmart proposes to buy 51% stake in Flipkart, as per the media reports. This week, Walmart has completed its due diligence process on the Indian e-commerce player Flipkart. The deal is expected to close by June, 2018.
Currently Flipkart faces tough competition from other ecommerce giant Amazon. Further, Amazon may also submit a proposal to buy majority stake in Flipkart, as per the media reports. Flipkart was founded by former amazon employees Binny Bansal and Sachin Bansal in 2007. Japan’s Softbank has ~20% stake in Flipkart, while other investors include Tiger Global, Accel, Naspers, ebay, Tencent Holdings, Microsoft, etc.
Walmart is expected to buy new as well as existing shares of Flipkart. This offer may value the Indian ecommerce giant at US$20bn.
What impact will it have on the Indian e-commerce and retail Industry?
India’s e-commerce industry is set for a boost owing to combination of factors including (a) rising internet penetration, (b) lower data cost, (c) higher smartphone usage, and (d) higher disposable income driven by higher per capita income.
The above factors make Indian market very attractive for foreign players like Walmart, etc. which is very evident from this deal valuing Flipkart at US$20bn. The existing Indian retail players like Dmart, Future Retail, etc. have already started their own online platforms. While other apparel retailers are using e-commerce platforms of Flipkart, Amazon, etc.
Walmart’s acquisition of Flipkart will provide it additional funds to strengthen its position in Indian market. This will give tough competition to rivals like Amazon and other domestic players, as Walmart has successful track record of establishing itself as one of the most successful retailer in the US.