This is the highest price any foreign company has paid for a stake in an Indian company. It has also managed an excellent valuation, by all accounts, giving both its co-founder Sachin Bansal, and several of its key investors, profitable exits. Getty Images Sachin Bansal is one of the founders of FlipkartĪmazon runs a profitable business worldwide, thanks to its cloud computing service, and it has the cash to take on newer markets.įlipkart, however, needs the financial strength Walmart offers. Both competitors have been "burning cash" in massive sales and discounts pegged to Indian festivals in a bid to acquire more customers. The deal also saves Flipkart, which was running out of cash in its battle with Amazon.
After Walmart bought the controlling stake, Flipkart is valued at more than $20bn. Walmart said in a media release that Flipkart will leverage Walmart's diverse retail expertise, merchandise supply-chain knowledge and financial strength, while Flipkart's "talent, technology, customer insights and agile and innovative culture" will benefit Walmart. This is because Flipkart is not expected to be profitable for some years and the Indian e-commerce market is small by global standards - 100 million customers in a country with about 1.3 billion people.īut the deal still gives Walmart the fastest entry possible into one of the most promising, albeit difficult, e-commerce markets. This widely-held view was echoed on Wall Street, where Walmart shares dropped to their lowest intraday price since October 2017, wiping $10bn off its market capitalisation.ĪFP/Getty Flipkart claims more than 100 million registered users in India Why did Walmart's stock crash after the deal was announced?Īnalysts believed that Walmart overpaid for its stake in Flipkart. Its net sales, after discounts, returns and cancellation, were worth $4.6bn.Īmazon, too, made a bid for Flipkart but the merger could have faced severe scrutiny from India's antitrust regulator as their combined sales would have added up to almost 90% of India's e-commerce market. The company sold products worth a total of $7.5bn in the financial year that ended in March 2018 - the sales had grown by 50% since the previous year. This deal is also a new front in Walmart's battle with Amazon, the global leader in online retail, which accounts for 44% of the US e-commerce market. So this acquisition allows the company to jump straight into a small but growing e-commerce market with about 100 million customers. Getty Images Walmart is ubiquitous in the USĪlthough Walmart has 21 "cash-and-carry" wholesale stores in India that sell to businesses, it has no other retail presence in the country.
"India is one of the most attractive retail markets in the world, given its size and growth rate," Walmart's president and CEO Doug McMillon said in a statement.
Why did Walmart spend so much on Flipkart?
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But its sales have barely grown offline and its online sales account for just a little more than 3% of its business in the US.įlipkart, founded in 2007 by Sachin Bansal and Binny Bansal (no relation), is India's biggest e-commerce company and has had high-profile investors including Microsoft, Tencent and Softbank.īut after Walmart announced the deal on Wednesday, its shares tumbled 4%, a likely reflection of the high price the company paid for Flipkart. Walmart, best known for its grocery stores, discount department stores and hypermarkets, is ubiquitous in the US. Global retail giant Walmart has paid $16bn (£11.8bn) for a majority stake in Flipkart, India's biggest online retailer, making this the world's largest ever e-commerce acquisition. Reuters Flipkart is India's biggest e-commerce company
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