Walmart Completes 77% Stake Buy In Flipkart; To Invest $2 Billion

Irving Hamilton
August 19, 2018

Flipkart's existing management team which includes CEO Kalyan Krishnamurthy, will continue to lead the business. Tencent Holdings Limited and Tiger Global Management LLC will remain represented on the Flipkart board, in addition to independent board members, and will be joined by new members from Walmart.

The company says the Flipkart investment transforms its position in a country with more than 1.3B people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and e-commerce penetration. Both Walmart and Flipkart will also retain their unique brands and operating structures in India.

With the investment, Flipkart will leverage Walmart's omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart's talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe.

Walmart (NYSE:WMT) completes its investment to become the largest shareholder in Flipkart with a 77% stake. "Future investments by Walmart will support national initiatives and will bring sustainable benefits in jobs creation, supporting small businesses, supporting farmers and supply chain development and reducing food waste", the company said in a statement.

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Notably, with Walmart having completed the Flipkart deal, Flipkart's financials will now be reported as part of Walmart's worldwide businesses. "The remainder of the business is held by other shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global and Microsoft Corp", a statement said today. Also, SoftBank, which had invested United States dollars 2.5 billion in Flipkart past year, has also exited the e-commerce firm, raking in about USD 4 billion from the deal.

Walmart CEO Doug McMillan and Flipkart co-founder Binny Bansal. Just in the first two quarters of the current financial year, Amazon has invested Rs 53 billion (approximately $750 million) into its Indian e-commerce business as it looks to accelerate growth and get ahead of Flipkart. The Bentonville giant's investment includes United States dollars 2 billion of new equity funding to help accelerate the growth of the Flipkart business.

Analysts expect Flipkart to continue to be a drain on Walmart's profits for the next couple of years, despite the companies indicating that they were trying to build a profitable business that could even be taken public within the next five years.

What Changes After The Flipkart-Walmart Acquisition Deal?

The company also added that it expected headwinds to the EPS of around $0.60 in FY20 on account of additional investment required for accelerating the growth of Flipkart. The US retail giant's stock closed 0.8 per cent down on Friday before the markets closed over the weekend.

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