INDIA – Walmart Inc. on has announced its high profile acquisition of Flipkart for US$16 billion for a valuation of over US$20 billion, making it the largest ecommerce acquisition in the world.
ET Retail has reported that the 77% acquisition deal of the Bengaluru-based company, as per sources, is also the largest buyout for the US company with its biggest bet ever in online space.
In India, it underscores the growing digital consumption potential in a country of 1.3billion.
This announcement culminates discussions between Walmart and the Bengaluru company that began in September 2016 with Walmart’s plans to pick a minority stake in Flipkart.
The talks pivoted earlier this year towards the world’s largest retailer acquiring Flipkart.
The deal, which will see founder Sachin Bansal exit completely, will now put US-based giants Walmart and Amazon in the Indian market, which experts say will help in growing the share online retail.
“This allows Walmart to jump into a high-growth market, and results in two global players focusing on the growth of the Indian ecommerce market,” said Prasanto Roy, vice-president of NASSCOM’s Internet council.
“The ecommerce fight ahead should be less about market share than about growing the market manifold.”
However, the deal will change up a lot of things in the retail market, to which the consumers and producers have not been able to come into terms with.
“These products would be brought in at hyper-competitive prices, which will cannibalise the market and make it difficult for other sellers to operate.
We are studying the situation and will take appropriate action, including the legal route, if necessary,” a spokesperson of the All India Online Vendors’ Association (AIOVA), which has 3,500 sellers on large platforms like Flipkart and Amazon, told TOI.
“The distribution of wealth will be inspiring. We haven’t had such as situation since Infosys.
It will inspire many more Indians to take the entrepreneurial path in the coming years,” said Vani Kola, managing director of Kalaari Capital.
Walmart intends to keep the current management of Flipkart and the Bengaluru team will report to Marc Lore, CEO of Walmart’s US e-commerce, whose company Jet.com was acquired by Walmart for US$3.3 billion in August 2016.
Overall, the Walmart-Flipkart deal is expected to be a good boost for the ecommerce sector and may bring in some rationality, according to Sanjay Sethi, CEO of ShopClues.
“Walmart is a long-term player, and it might bring in more rationality into the market,” Sethi said.
“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 chief executive officer in a statement .