Taking a big piece of India's fast-growing e-commerce pie, Walmart, the world's largest retailer, is all set to announce its plan to purchase a majority stake in Flipkart. The deal involves the world's biggest company by revenue buying around 70 per cent shares in the Indian e-commerce market leader for $15 billion, valuing the e-tailer close to $20 billion.
Masayoshi Son, the CEO of Japanese internet conglomerate, on Wednesday confirmed that SoftBank will sell its stake in the online retail major to US-based Walmart. Son unintentionally made the mega deal news public before the formal announcement. According to Bloomberg, Son revealed to a roomful of journalists and investors in Tokyo that the deal has been decided, only to realise it was not fully confirmed as of now.
SoftBank Group, which owns about a fifth of Flipkart through its Vision Fund would sell its 20-plus per cent stake in the company. Last year in August, SoftBank had bought a 20 per cent stake in the India's largest online marketplace for $2.5 billion. It was the biggest ever private investment in an Indian tech firm at the time.
The Bentonville, Arkansas-based global behemoth is expected to rope in tech giant Google to buy a part of stake in India's largest online marketplace. Google's parent Alphabet already has a partnership with brick-and-mortar retail major Walmart in the US since last year. The coming together of Walmart and Google is expected to synergise Walmart's offline operational efficiency with Flipkart's vast online presence in India.
Earlier this month, Flipkart bought back over 1.8 million shares worth more than $350 million from minority investors, paving way for Walmart to buy around 70 per cent stake from a single entity rather than multiple parties. Walmart's bid to buy controlling stake in Flipkart is being viewed as an attempt to challenge Amazon's booming retail business across the world.
Walmart's acquisition of Flipkart will help the world's largest retailer in challenging the dominance of Amazon which has been eating up its market share in the US. The deal will also give a fillip to Walmart's online ambitions in a significantly huge market like India.
While both the acquiring and the selling companies are based outside India, the acquisition of Flipkart Pvt Ltd, which is registered in Singapore, may still attract tax liability and the purchaser will have to deduct tax amount while making the payment to existing investors.
Walmart had earlier completed its due diligence for the Flipkart deal. Both Walmart and India's homegrown e-commerce leader stand to gain much from the deal. To begin with, they get to pool resources to compete against a common enemy, Amazon, in online as well as offline retail channels. Walmart also gets to grab a foothold in India's booming e-commerce industry.
Meanwhile, Flipkart stands to not only add financial muscle but also strengthen its supply chain and enhance efficiency in procurement, product assortment and retailing. India's leading e-tailer, besides, has been looking to open retail stores in India for a long time now but has been waiting for the right investment partner. As such, the partnership between Walmart and Flipkart already seems like a match made in heaven.