US retail giant Walmart has officially announced buying a majority stake in the biggest e-commerce platform in India, Flipkart. The Walmart and Flipkart deal, valued at $16 billion, represents the latest move by the US company to compete head-on with Amazon.
Walmart and Flipkart deal details
The deal ends 19 months of talks between Walmart and Flipkart. Walmart said it would initially purchase a 77 percent stake in the Indian firm and invest $2 billion in fresh capital into it. The two firms said they will continue to talk with other investors about potentially purchasing a stake, which means Walmart’s shareholding in Flipkart might be reduced.
Flipkart is the current market leader in the Indian e-commerce platform although Amazon’s new India site is giving it a run for its money.
Walmart and Flipkart deal: Who wins?
Still, the Walmart and Flipkart deal is considered a landmark for the burgeoning internet industry in India. This is perhaps the first time that an Indian internet start-up has received a huge valuation from a US firm.
Many of Flipkart’s employees, including its investors, will get a lot of money from the deal. Co-founder Sachin Bansal, for instance, will become an instant billionaire when he sells his entire 5.5 percent stake.
However, many observers are not sure of the benefits of the deal to Walmart. While the Internet population in India is rapidly growing, the number of people who shop online is still not that huge.
Walmart has always been known for its physical stores. It has tried several times to cross over to e-commerce and challenge Amazon, which is the undisputed leader in the US.
Walmart and Flipkart similarities
Like Walmart, Flipkart has dealt with several challenges as well. In 2013, it faced the entry of Amazon in India. Amazon infused more than $5.5 billion into its Indian firm and offered extra features like Prime video streaming.