Published: Fri, May 11, 2018
Finance | By Jaime Brady

Walmart To Buy Controlling Stake In India's Flipkart For $16bn

Walmart To Buy Controlling Stake In India's Flipkart For $16bn

Flipkart plans to buy back almost $500 million worth shares from former and existing employees, Mint reported.

Right after Walmart's announcement to buy 77 percent stake in Flipkart for 16 billion Dollars, eBay announced it is severing business relations with Flipkart.

On Thursday, Sachin Bansal, who co-founded Flipkart in 2007 with college mate Binny Bansal, confirmed his departure in a Facebook post.

Accel said that Flipkart's success was mostly due to the company building its own delivery network and pioneering cash-on-delivery models.

Tiger Global: More than any other fund, the elite and low-profile NY investment vehicle Tiger Global bet aggressively on Flipkart and it's paid off. The final makeup of the board might also include independent members.

Walmart intends to use a combination of newly issued debt and cash on hand. From Amazon's perspective, its domination of global online retail has forced its biggest American rival, Walmart, to spend a whopping $16 billion-a clear acknowledgement that it is trying hard to make up for lost time. While the first phase was dominated by hyper-competition, extreme growth and the battle for gaining market share at any cost, it also led to a lot of players betting on wrong business models. Gunderson Dettmer LLP, Khaitan & Co., Allen & Gledhill LLP and Dentons Rodyk & Davidson LLP provided legal counsel to Flipkart. That's a fraction of Walmart's latest annual revenue of $485.8 billion.

India is one of the world's fastest growing online retail markets, and Walmart's 77 percent investment in Flipkart ensures its presence in a market which is set to hit $73 billion a year by 2022, with an increase in smartphone users. "We have met before and I am sure will meet again".

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"We are confident this group will provide Flipkart with enhanced strategic and competitive advantage".

Doug McMillon, Walmart's president and CEO said, "Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs".

Sachin Bansal will be selling his 5.5 % stake in Flipkart that's worth around $1 billion to Walmart, reports the Economic Times.

With its investment in Flipkart, Walmart will be able to penetrate the Indian online retail market, in a country where it would've struggled to open its own e-commerce business, given that India doesn't permit foreign investment in online retailing, says Mihir Sharma.

In the blog, Accel's partners admitted that they were way off in their original assumption was Flipkart would require around $500 million in additional capital to reach break-even, despite realising that the company would need to be financed in an unprecedented fashion.

It's said that both companies will operate distinctively in the country. Despite having a superior technology and operational set-up, Amazon is still second to Flipkart in terms of market share.

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