Walmart on Wednesday announced its high profile acquisition of Flipkart for $16 billion for a valuation of over $20 billion, making it the largest eCommerce acquisition in the world. The Bentonville company has acquired 77% of the Bengaluru-based company, as per sources.
This is also the largest buyout for the US company with its biggest bet ever in online space and on India, underscoring the growing digital consumption potential in a country of 1.3 billion.
The Wednesday announcement culminates discussions between Walmart and the Bengaluru company that began in September 2016 with Walmart’s plans to pick a minority stake in Flipkart. The talks pivoted earlier this year towards the world’s largest retailer acquiring Flipkart.
The deal, which will see founder Sachin Bansal exit completely, will now pit US-based giants Walmart and Amazon in the Indian market, which experts say will help in growing the share of online retail.
“This allows Walmart to jump into a high-growth market, and results in two global players focusing on the growth of the Indian eCommerce market,” said Prasanto Roy, vice-president of NASSCOM’s Internet council.
“The eCommerce fight ahead should be less about market share than about growing the market manifold.”
The deal is also expected to generate wealth in crores of rupees for founders, investors as well as several employees.
“The distribution of wealth will be inspiring. We haven’t had such as situation since Infosys. It will inspire many more Indians to take the entrepreneurial path in the coming years,” said Vani Kola, managing director of Kalaari Capital.
Walmart intends to keep the current management of Flipkart and the Bengaluru team will report to Marc Lore, CEO of Walmart’s US e-commerce, whose company Jet.com was acquired by Walmart for $3.3 billion in August 2016.
Overall, the Walmart-Flipkart deal is expected to be a good boost for the eCommerce sector and may bring in some rationality, according to Sanjay Sethi, CEO of ShopClues.
“Walmart is a long-term player, and it might bring in more rationality into the market,” Sethi said.