Published: Fri, May 11, 2018
Money | By Hannah Jacobs

Walmart sinks $16 billion into Flipkart for 77% stake

Walmart sinks $16 billion into Flipkart for 77% stake

"This investment is of huge 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 CEO.

The blockbuster takeover threatens a major blow to rival Amazon's ambitions in India.

Putting up a fearless face, Biyani said to the newspaper that Future Group has a lead over other retailers in the country and he can shore up his company's strength as India played host to the world's biggest e-commerce deal. But it will take some time for the business to turn profitable, and analysts on a Wednesday morning call about the deal adopted a cautious tone. "It's an extension of the $500-billion Walmart's global expansion strategy".

Accel, one of the first investors in Flipkart, has earned a sevenfold return, including a 71-times return with its Accel India Fund. The company's stock was already down 13% this year through Tuesday's close. The US giant expects the deal to negatively impact its 2019 earnings per share by between $0.25 - $0.30.

"It's typical of a business like this that, as you scale up, you will have losses. With Walmart on board, we are committed to doing more of the same".

Walmart shares ended the US Wednesday trading session 3.13% lower at $83.06. Walmart International president Judith Mckenna and Dirk Van den Berghe, executive VP and regional CEO, Walmart Canada and Asia, are also expected to become directors.

"We've been looking at this business for some time". And even beyond the immediate payoffs, Walmart's growth in India through Flipkart should accelerate for years.

Walmart was upstaged earlier Wednesday when Masayoshi Son, chief executive officer of SoftBank Group, confirmed during a briefing in Tokyo that the US retailer had agreed to buy control of Flipkart.

SoftBank made a 60% return, netting $ 4 billion on a $2.5 investment made in August 2017, as we mentioned earlier.

"This is Rs 1 lakh crore all cash deal which is a flawless answer to those who were dismissive of Indian start-ups in an open-for-all market", tweeted Paytm Founder Vijay Shekar Sharma.

During a recent investor call, Amazon CFO Brian Olsavsky had said the company would continue to invest in India as it sees?great progress? with both sellers and customers here, even though as the United States e-tailing giant had registered a loss of Dollars 622 million from global operations in the first quarter of 2018. It now operates 20 wholesale clubs in India that serve small businesses.

"Subject to regulatory approval in India, Walmart will pay $16 billion ( ₹1,07,662 crore) for 77 percent equity stake in Flipkart", the Arkansas-based firm said in a statement. This would mean that the USA behemoth's stake might reduce later on.

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