Thursday 19 September 2019

Walmart pays £11.8bn for controlling stake in Indian retail giant Flipkart

The deal for the Indian online retailer is the largest acquisition yet by the US giant.

The Flipkart headquarters in Bangalore, India (AP)
The Flipkart headquarters in Bangalore, India (AP)

By Associated Press Reporters

Walmart will soon reach shoppers in India’s massive consumer market directly, as it takes control of the online retailer Flipkart.

The 16 billion dollar (£11.8 billion) controlling stake is the largest acquisition yet by the world’s largest retailer.

Retail sales are being fuelled by a hot economy in India, and both Walmart and Amazon have pushed hard to catch up to Flipkart and become the first major US retailer to establish a substantial foothold in the country.

The move, like Walmart’s decision last month to sell Asda, reflects the company’s focus on areas with the potential to grow as it tries to narrow the online gap between itself and Amazon.

Walmart said it will pay about 16 billion dollars for a majority stake in India’s leading e-commerce company (AP)

Online buying in India has exploded in recent years, and Flipkart had net sales of 4.6 billion dollars (£3.4 billion) in its latest fiscal year, That is a fraction of Walmart’s latest annual revenue of 485.8 billion dollars (£358.8 billion), but the company sees big long-term potential.

Walmart believes India, which has a population of 1.3 billion, could be in the world’s top five-e-commerce markets within the next five years.

Walmart CEO Doug McMillon said: “We are actively working to shape the portfolio of geographies and businesses we’re in, in order to set the company up for success for another generation.”

Flipkart is, in some ways, an echo of Amazon. Founded in 2007 by two college friends and former Amazon employees, Flipkart began life as an online bookseller.

In a country where many still see paying online with credit or debit cards as risky, Flipkart earned millions of customers in its early years by allowing buyers to pay cash on delivery. It now allows for a variety of payments, from credit cards to gift vouchers to direct bank transfers.

Flipkart also focused early on mobile phone users, and in 2016 became the first app in India to reach 50 million users.

Flipkart came to prominence in a country where online transactions are still viewed with suspicion (AP)

The Bangalore-based company has acquired a string of other companies in recent years, from fashion e-commerce company Myntra to mobile payment firm PhonePe. Flipkart now has over 100 million registered users and more than 100,000 registered sellers.

Flipkart’s supply chain arm, eKart, is established in more than 800 cities and makes 500,000 deliveries daily.

The firm’s success and Indian law that puts limits on foreign retailers made it an attractive target, and rumours swirled about Amazon also circling Flipkart long after it was reported to be in talks with Walmart.

Walmart’s business in India was previously focused on small businesses. Its Best Price stores, owned and operated by its India division, are only open to members that are all licensed businesses.

Whether the Flipkart deal signals a change remains unclear, but the Flipkart purchase gives Walmart far more influence in India – both politically and economically – and positions it to shift quicker into retail outlets if the regulatory landscape changes.

Walmart will now own about 77% of Flipkart, with the rest held by some existing shareholders, including co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft.

PA Media

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