Walmart Buys Flipkart in Biggest Global Ecommerce Deal

13 May, 2018, 02:42 | Author: Eric Barnett
  • Not an easy path

The investment will help accelerate Flipkart's mission to transform ecommerce in India through technology and is one in the eye for Amazon, a would be early suitor for FlipKart.

Within hours of adding Flipkart to its shopping cart at a United States $16 billion price tag, Walmart CEO Doug McMillon told the e-retailer's employees that the deal was among the best decisions and emphasised that India was the best place was to be in, according to sources.

"We are studying the deal and may resort to legal options based on the structure of the deal". They (Walmart) are a brick-and-mortal company, by and large. Flipkart's other investors like New York-based Tiger Global, Accel and South Africa's Nesper are also going to sell their stakes in Flipkart to Walmart.

"The dynamics of the online and offline retail will never be the same post the Walmart-Flipkart deal", CMR said, adding that the deal will pave the way for a "new growth story for organized retail" in India.

Interestingly, there were speculations that Amazon had also made a bid for Flipkart, even though neither of the companies confirmed it.

The Walmart chief stated that the values of the two companies were "very much aligned".

Jasani further said the deal could result in retailing alliances locally, potentially influencing sectoral valuations. While the move certainly positions Walmart for long-term success in the market, analysts explain that Amazon remains in solid shape in India as well.


Besides, "it is much more hard for the government to control and regulate foreign owned platforms particularly in e-commerce sector which has no boundaries", Khandelwal said.

Shares of Future Retail jumped 4.67 per cent on Thursday, a day after Walmart announced the deal.

Furthermore, in light of the Flipkart-Walmart deal, there are chances that Flipkart might introduce a wider range of products with Walmart's backing. S&P Global Ratings said the heavy spending to compete with Amazon could threaten Walmart's pristine credit rating.

Flipkart co-founder Binny Bansal told employees that the company would stay focused on eventually becoming a publicly listed Indian tech leader. It said that it will support farmers by sourcing its local inventories.

By joining forces with Walmart, perhaps Flipkart can build on that lead.

In Brazil, a nation just coming back after a two-year recession and political unrest, Walmart has already closed stores, overhauled management and wound down its e-commerce platform. So far it had been handicapped by India's retail policy that does not allow overseas companies to sell directly to consumers (except in wholesale cash-and-carry segment).

With more start-ups entering the scene, Shah expects a steady increase in cross-border deal activity. "In the long run, it can trigger consolidation or strategic tie-ups between online and offline players; Amazon-Shoppers Stop is an example", IDFC Securities noted.

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