Walmart picks up 77 percent stake in Flipkart for $16 billion
New Delhi, May 9 (IBNS): US-based retail giant Walmart Inc. on Wednesday announced it has signed definitive agreements to become the largest shareholder in India's largest e-commerce player Flipkart Group.
Walmart said the investment will help accelerate Flipkart's customer-focused mission to transform commerce in India through technology and underscores its commitment to sustained job creation and investment in India.
Subject to regulatory approval in India, Walmart will pay approximately $16 billion for an initial stake of approximately 77 percent in Flipkart, formally Flipkart Private Limited.
"The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp," read a statement issued by Walmart.
While the immediate focus will be on serving customers and growing the business, Walmart said it supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Doug McMillon, Walmart’s president and chief executive officer. “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 India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”
“This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India,” said Binny Bansal, Flipkart’s co-founder and group chief executive officer. “While eCommerce is still a relatively small part of retail in India, we see great potential to grow. 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.”
Founded in 2007, Flipkart has led India’s eCommerce revolution over the years.
Currently, Walmart India operates 21 Best Price cash-and-carry stores and one fulfillment center in 19 cities across nine states in India, with more than 95 percent of sourcing coming from India, aiding suppliers, creating skilled jobs and contributing to local economies across the country.
Krish Iyer, president and chief executive officer of Walmart India, will continue to lead that part of the business.
“Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart,” said Judith McKenna, president and chief executive officer of Walmart International.
“This investment aligns with our strategy and our goal is to contribute to India’s success story, as we grow our business. Over the last 10 years, Flipkart has become a market leader by focusing on customer service, technology, supply chain and a broad assortment of products. With Flipkart and the other shareholders who have come together, we will continue to advance the winning eCommerce ecosystem in India.”
Structure, financial implications and other details
Walmart’s investment includes $2 billion of new equity funding, which will help Flipkart accelerate growth in the future.
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.
Even so, the company would retain clear majority ownership.
Tencent and Tiger Global will continue on the Flipkart board, joined by new members from Walmart.
The final make-up of the board has yet to be determined, but it will also include independent members.
The board will work to maintain Flipkart’s core values and entrepreneurial spirit, while ensuring it has strategic and competitive advantages.
Closing is expected later this calendar year, subject to regulatory approval.
To finance the investment, Walmart intends to use a combination of newly issued debt and cash on hand. Upon closing, Flipkart’s financials will be reported as part of Walmart’s International business segment.
If the transaction were to close at the end of the second quarter of this fiscal year, Walmart expects a negative impact to FY19 EPS of approximately $0.25 to $0.30, which includes incremental interest expense related to the investment.
Image: Walmart Twitter page