Walmart to get 55-61% stake in Flipkart, to invest USD 2-3 billion
In a development which will make converters working in the eCommerce segment happy but perhaps supporters of made in India see red, global retail giant Walmart is planning to invest USD 2-3 billion (over Rs 13,000 crore) as fresh equity into Flipkart, while buying existing shareholders for a majority control. According to the deal, which is yet to be announced, Walmart is expected to get a 55-61% stake in Flipkart while Alphabet, the parent company of Google, will pick up around 10%.
09 May 2018 | By PrintWeek India
According to trade pundits, while many see the deal to be a sell-out to foreign investors, Flipkart, founded by Sachin and Binny Bansal over a decade ago, needs the cash to compete with Jeff Bezos-founded behemoth Amazon.
Meanwhile, Walmart is expected to highlight how it intends to work with local SMEs and the farm sector in the country, a strategy that it has followed for its wholesale cash-and-carry venture, after being denied an entry into the B2C retail market, where it had hoped to open a chain of stores.
Walmart is likely to bring its managerial expertise, although the existing leadership in Flipkart is expected to stay.
Walmart India owns and operates 21 stores under the cash-and-carry system in nine states across the country. It also has a global sourcing centre in Bengaluru and a technology centre, which employs 1,200 engineers. The sourcing centre procures non-food products from domestic companies for over a dozen global markets. Sources said the two businesses will be run as separate entities and Walmart will use its experience in sourcing and working with farmers and kirana stores to strengthen its online presence.
Meanwhile, a lobby, led by the Swadesh Jagaran Manch, has raised concerns about the acquisition with support from some other trade lobby groups, saying that the deal is in violation of Indian laws, as FDI in ecommerce is not allowed. Not only this, the foreign entities will kill competition and flush small retailers.
While this may be a genuine concern, the Centre or RBI can do little to block the deal. The proposal only requires a clearance from the Competition Commission of India (CCI).
Under current rules, overseas investment is allowed in a marketplace but there a vendor cannot account for over a quarter of the sales. Already, several international investors, including Soft-Bank, Tiger Global and Tancent were shareholders in Flipkart, which is registered in Singapore. (Courtesy news agencies)