The $16 billion Walmart-Flipkart deal marks a milestone in the world's largest e-commerce deal ever. The Bentonville, Arkansas-based global retail behemoth on Wednesday signed a definitive agreement to become the largest shareholder in Flipkart Group. The latest deal puts Walmart directly on the map of India's growing e-commerce market - estimated to be around over $200 billion by 2026 - against the likes of the US e-Com player Amazon. Here are top 10 key takeaways from the deal.
1. MAJORITY STAKE: Walmart will pay $16 billion for an initial stake of 77 per cent in Flipkart, valuing the e-tailer close to $20 billion. 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. Walmart's investment includes $2 billion of new equity funding, which will help Flipkart accelerate growth in the future.
2. MORE INVESTORS TO JOIN IN: 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.
3. AIM TO BECOME PUBLICLY-LISTED: The new Walmart-owned entity's immediate focus will be on serving customers and growing the business. The company will also aim to transition into a publicly-listed, majority-owned subsidiary in the future.
4. E-COM TO GROW FOUR TIMES: Walmart expects India's e-commerce market to grow at four times the rate of overall retail, and with well-known platforms such as Myntra, Jabong and PhonePe, Flipkart is uniquely positioned to leverage its integrated ecosystem, said Walmart.
5. WIN-WIN FOR BOTH FIRMS: The deal is a win-win for both the companies. Flipkart's supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily. In the fiscal year ended March 31, Flipkart recorded GMV of $7.5 billion and the net sales of $4.6 billion representing more than 50 per cent year-over-year growth in both cases, said Walmart.
6. BEST PRICE TO MAINTAIN DISTINCT BRANDS: The new entity and Best Price will maintain distinct brands and operating structures. Krish Iyer, president and chief executive officer of Walmart India, will continue to be the head of its business through Best Price stores. Walmart India operates 21 Best Price cash-and-carry stores, with more than 95 per cent of sourcing coming from India, aiding suppliers, creating skilled jobs and contributing to local economies across the country, said the retail giant.
7. NEW BOARD ANNOUNCEMENT SOON: 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.
8. BIG 'MAKE IN INDIA' PUSH: Walmart said it supports small business and 'Make in India' through direct procurement as well as increased opportunities for exports through global sourcing and e-commerce. The company aims to partner with kirana owners and members to help modernise retail practices and adopt digital payment technologies.
9. LOCAL OUTSOURCING, BETTER LOGISTICS: The company says it would support farmers and develop supply chains through local sourcing and improved market access. It primary focus would also be on reduced food waste by improving waste management practices and investing in supply chains, especially cold storage.
10. MAJOR PLAYER IN INDIAN MARKET: The Flipkart investment transforms Walmart's position in a country with more than 1.3 billion people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and e-commerce penetration, said the company.
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