Walmart. Inc has officially acquired Flipkart for $16 billion in a deal that soared the valuation of Indian e-commerce platform to over $20 billion, making it the biggest e-commerce acquisition ever globally. The brick-and-mortar company acquired 77% of the Indian e-tail business.
The news was also confirmed by previous Flipkart investor, Softbank CEO, Masayoshi Son who also stated that the Japanese conglomerate sold out the 20% stakes it bought last year for $2.6 Bn at $4 Bn, therefore making a 60% profit on its initial investment. Out of the 50 existing investors in Flipkart, only Tiger Global Management and Tencent are expected to prolong their association with the e-commerce giant.
This is also the first time that a US company bought out an entire online platform in India, driven by the ambition to capitalize its $16 Bn investment in a country boasting over 1.3 billion inhabitants.
Today’s announcement ends discussions between the Arkansas based company and the Bengaluru based company that started in September 2016 when Walmart initially tried to buy a minority stake in Flipkart back then. The negotiations then culminated to the complete acquisition of the Indian e-commerce giant.
The deal will see founder Sachin Bansal exit the company completely, having sold his last remaining 5.5% shares of the company for $1 billion. Experts now believe that the entry of Walmart and existence of second major American market player, Amazon will drive Indian customers to turn to online retail further.
“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.
The acquisition is also reported to be very profitable for founders, investors and employees alike who will all cash in colossal amount on the current change in power.
“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.
Commenting on the deal, Sanjay Sethi, CEO of Shopclues, stated that he was happy about the Flipkart-Walmart deal since he expects the acquisition to bring in some rationality in a market that was driven by excessive discounts and burn rate.
“Walmart is a long-term player, and it might bring in more rationality into the market,” Sethi said.