INSUBCONTINENT EXCLUSIVE:
Flipkart co-founder Binny Bansal and other shareholders will hold the remainder stake
Walmart Inc
agreed to buy a controlling stake in India's biggest online retailer, striking a blow against rival Amazon.com Inc
as the battle for e-commerce supremacy goes global.The world's largest retailer will acquire a 77 percent holding in Flipkart Group for $16
billion, the companies said in a statement
Flipkart co-founder Binny Bansal and other shareholders will hold the remainder.The deal -- Walmart's biggest ever -- gives it greater
access to India's e-commerce market, which Morgan Stanley has estimated will grow to $200 billion in about a decade
Flipkart, meanwhile, gets additional capital and expertise to battle Amazon, which has spent billions of dollars to gain customers in India
Online sales in the world's second most-populous nation are growing about 35 percent a year, according to data tracker Euromonitor, fueled
by a rising middle class and urbanization that present an attractive environment for e-commerce.Walmart was upstaged earlier Wednesday when
Masayoshi Son, chief executive officer of SoftBank Group Corp., confirmed during a briefing in Tokyo that the U.S
retailer had agreed to buy control of Flipkart
SoftBank invested $2.5 billion in the Indian company and that stake will be worth about $4 billion in the deal, Son said.For the U.S
retailer, acquiring a stake in Flipkart enables it to tap into India's retail market without building stores
Walmart once envisioned operating hundreds of locations across India but it has been unable to open traditional units because of
long-standing governmental rules for so-called multibrand international retailers
Walmart entered India in 2009 through a joint venture with Bharti Enterprises, and took full control of that business in 2013
It currently operates 20 wholesale clubs in India that serve small businesses.Biggest Deal"Online retail is seemingly the only way for a
foreign company to have meaningful retail operations in the country," Barclays analyst Karen Short said in an April 16 note.The deal is the
largest-ever in e-commerce, according to data compiled by Bloomberg.Walmart's investment includes $2 billion in new equity funding, which
the companies say will be used to spur Flipkart's growth
The companies said they're also in talks with other potential investors, which could result in the U.S
company's stake being lowered, though it will retain majority ownership
Flipkart will maintain a separate brand and operating structure, the companies said.The deal represents another missed opportunity for
Amazon CEO Jeff Bezos, who has also failed to create a meaningful presence in China
Amazon needs another potential high-growth market in which to succeed to prove it can effectively replicate its model beyond North America,
and it has been aggressively expanding in India
Bezos has committed $5.5 billion to the country and his local chief, Amit Agarwal, has made progress by adapting the site to local
conditions.Despite its size and global clout, Walmart has found it necessary to forge alliances in its battle against Amazon, which last
year bought Whole Foods Market to gain a foothold in the U.S
In China, Walmart has acquired a 12 percent stake in e-commerce player JD.com, and in Japan it teamed up this year with Tokyo's Rakuten Inc
India is the next big potential prize after the U.S
and China, where foreign retailers have made little progress against Alibaba Group Holding Ltd.CEO's PlansThe deal also shows how Walmart
CEO Doug McMillon is reshaping the company's global operations, prioritizing faster-growing markets like China and India over more mature
Last month, the company agreed to cede control of its U.K
grocery chain, Asda, merging it with British rival J Sainsbury Plc
Walmart will retain a 42 percent stake in the combined company.Flipkart competes with Amazon across a range of product categories
Besides its own site, it owns fashion portals Myntra and Jabong and controls 34 percent of India's online sales, based on Euromonitor data,
followed by Amazon, with 27 percent.The Indian company has attracted investment from a range of companies that also includes Microsoft
Corp., Tencent Holdings Ltd
and Tiger Global Management, which will retain stakes.(Except for the headline, this story has not been edited by TheIndianSubcontinent
staff and is published from a syndicated feed.)
