American retail giant Walmart Inc will acquire 77% stake in India’s largest e-commerce retailer Flipkart for $16 billion announced Softbank’s CEO Masayoshi Son, a valuation over $20 billion in total, which will make it India’s largest acquisition and the world’s biggest e-commerce deal. The concluded deal is a result of talks that were started in September 2016. It’ll include $2 billion of fresh funding as Walmart appears to take on rival Amazon’s international growth.
Venture Capital investors and Private Equity will be seen taking the biggest exit from India following the deal, they are assumed to together make approximately $14 billion by selling shares to Walmart. The transaction will put it in the lead of the $14.6-billion Bharti-Indus Towers merger and the $12.9-billion Essar Oil-Rosneft transaction. The only merger valued higher was of Vodafone-Idea at $23 billion. The deal will see a complete exit of co-founder Sachin Bansal while the other co-founder Binny Bansal will remain invested in the venture-backed startup.
Let’s have a closer look what this deal would mean for various segments.
What does deal mean to Online Consumers and Online Sellers?
Customers shouldn’t be assuming a variety of changes in their buying experience after the deal’s completion. But they’ll definitely get more to choose from with Walmart’s private labels differentiating the merchandise. Flipkart will diversify its range of online shopping to attract more Indian consumers that still haven’t started shopping online. But the deal isn’t a good news for everyone, Online sellers on Flipkart must be feeling a little spooky because Walmart can wipe them off. Walmart bringing in its private labels through Flipkart to the Indian online customers will add to hyper-competitive pressures. Walmart, the $500 billion US behemoth, has a repute of killing small businesses with cut-throat prices. Amazon, on the other hand, will fight-back to ensure that prices remain competitive.
Importance of the Deal to Walmart :
The Flipkart deal is the most significant acquisition in the history of Walmart and one that was pushed by its chairman Greg Penner, inheritor to the multi-billion-dollar Walton own family fortune. Flipkart can be the centerpiece of Walmart’s international e-commerce goals, given India’s status of being one of the world’s final principal Internet economies.
Walmart has been very ambitious to enter India for years however only managed to get into cash-and-carry wholesale business due to strict foreign investment restrictions, currently having 21 wholesale stores in India.