US-based retail giant Walmart will be looking at investing about $2-3 billion in fresh equity into Flipkart after the completion of the acquisition. The deal to acquire Flipkart by investors led by Walmart was reportedly agreed upon last week, with Amazon being edged out by one of its biggest competitors in the US. The move is expected to strengthen its control over the Indian e-commerce company, as it looks to take on Amazon India in the competitive and rapidly growing Indian e-commerce space.
An IPO has also been planned for Flipkart in the next two years, but the details of this are far from being finalized. Additional investors may also be roped in by Walmart, which is controlled by the Walton family and is headquartered in Bentonville, Arkansas, United States. Walmart will retain operational control over Flipkart in order to align its growth with the US retail giant’s strategies and plans for its operations in India, ToI reports.
Walmart has limited presence in India through its conventional physical retail operations, but the acquisition of Flipkart will give it a huge foothold over the e-commerce segment in India. Flipkart is currently the number two e-commerce player behind Amazon India. Together, Amazon India and Flipkart control over 80 percent of the Indian e-commerce market.
Walmart is said to be planning to use the additional equity investments to set up sourcing for global operations, setting up supply chains and warehouses, as well as building partnerships with local grocery stores to enhance last-mile deliveries and fresh product sourcing. The wider reach of its platform will mean that customers can use Flipkart to place orders, which are carried out by local retailers.
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The deal for Flipkart is likely to be announced this week, with Walmart holding over 50 percent stake in Flipkart post the acquisition, and Google’s parent company Alphabet likely to hold about 10 percent. Major investors in Flipkart are expected to have their stakes largely acquired, with control over Flipkart’s board passing to Walmart and its partner investors. The deal could also see the complete exit of institutional investors such as SoftBank, as well as one of the co-founders of Flipkart from the board of directors and ownership.