The $500 billion US retailer Company, ‘Walmart’ purchased 77% stocks of Flipkart worth $16 billion. This is the biggest investment which Walmart has made in its entire history.
Doug McMillon, Walmart’s president and chief executive officer in a statement stated that, “As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market. We are also excited to be doing this with Tencent, Tiger Global and Microsoft, which will be key strategic and technology partners. We are confident this group will provide Flipkart with enhanced strategic and competitive advantage. Our investment will benefit by providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers and women entrepreneurs.”
The company has also pointed out that, “Walmart and Flipkart are also in discussions with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. The final make-up of the board has yet to be determined, but it will also include independent members and the board will work to maintain Flipkart’s core values and entrepreneurial spirit, while ensuring it has strategic and competitive advantages.”
Long with the new members of Walmart, Tiger Global and Tencent are also going to keep their seats on the Flipkart board. To strengthen its hold, Walmart is spending $2 billion as fresh equity. Analysts are expecting a large amount of fresh investment in strengthening the infrastructure of back-end. Analysts said that, “Walmart will extend its expertise in managing physical goods in the digital space with the acquisition of Flipkart.”
Ajay Srinivasan, the director of CRISIL Research states that, “The deal indicates the attractiveness of the consumption market for global majors. With Walmart acquiring stake in Flipkart, we expect enhanced thrust on the online grocery segment. We expect online grocery to be the fastest growing segment in the e-retail space, growing at a 65-70 per cent CAGR to touch Rs.100 billion in revenues by fiscal 2020.”