During their job in Amazon, Sachin and Binny dreamed of starting their own company, and today Flipkart is counted among the world's largest e-commerce companies. The Japanese company, through its Vision Fund, invested $2.5 billion in Flipkart and that stake will be worth about $4 billion in the deal, Son told a briefing on Wednesday.
Flipkart's sales grew more than 50 percent in its most recent fiscal year to $4.6 billion, Walmart said, compared with $11.5 billion for Walmart's US e-commerce business. It is now going to be interesting, how Amazon will tackle the combined capabilities of Walmart and Flipkart. "Both have their own sizeable cash reserves, and the outcome in India will determine the access to its growing middle class consumers for dominance, outside of the USA", said, Adrian Lee, Research Director, Gartner. It now allows for a variety of payments, from credit cards to gift cards to direct bank transfers. Walmart is acquiring 77 per cent stake in the Indian company, so it's getting the controlling rights. According to the reports from Bloomberg, the company has more than 100 million users registered on its site and the company sells eight million products in over 80 categories. Moreover, Flipkart is already the most valuable startup in India. With the deal, the Indian e-commerce space may face another fierce round of competition between home-grown Flipkart and US-based Amazon.
Walmart said Flipkart's logistics, payments and apparel businesses offer new areas of growth.
The deal is likely to value Flipkart at $20 billion. There will be an uneven level playing field to the disadvantage of retail traders. "Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore".
Amazon India had in January received $306.3 million (Rs 1,950 crore) from its parent company, a couple of months after it got its largest one-time capital infusion of $446 million (Rs 2,900 crore).
Doug McMillon said that e-commerce in India is growing four times faster than in-store distribution. Both were the former employees of Amazon. Amazon has been aggressively making expansions in the country. Forrester projects the online retail market in India to reach $73 billion by 2022. It also has a strategic alliance with Alibaba's rival, JD.com. The sheer population of India creates a huge user base for Walmart.
The Bentonville, Ark. retailer warned the deal - its largest overseas acquisition ever - will dent its earnings in the current fiscal year by 25 to 30 cents a share if it closes by the end of the second quarter. "This is clearly an investment for the future", said Charlie O'Shea, Moody's lead retail analyst in a note.