The whopping $16-billion mega deal by global retail giant Walmart with the country's leading e-tailer Flipkart for majority stake makes India an attractive destination for global majors in the digital space, industry experts said on Wednesday. Walmart said Flipkart's logistics, payments and apparel businesses offer new areas of growth. Satish Meena, Senior Forecast Analyst at Forrester Research, said while Walmart can utilise its sourcing and retail prowess to aid Flipkart's efficiency, it still needed to come up with a product that can match Amazon's Prime loyalty programme.
SoftBank made a 60% return, netting $ 4 billion on a $2.5 investment made in August 2017, as we mentioned earlier.
"Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America's Walmart", said SoftBank CEO Masayoshi Son, whose firm owns a 20 percent stake in Flipkart.
Global retail giant Walmart on May 9, 2018 formally signed a definitive agreement to acquire 77 percent stake in Flipkart with an investment of around Dollars 16 billion.
Just hours after the Walmart-Flipkart deal was announced, US-based ecommerce major eBay said it had notified Flipkart and Walmart about its intention to sell its holdings in the former, which would give it gross proceeds of approximately $1.1 billion.
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Walmart has been attempting to enter the Indian retail market for more than 15 years but the government's regulation of not allowing Foreign Direct Investment (FDI) into multi-brand retail proved as a hindrance for the USA retail giant.
The 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 ones.
For Walmart, hitching its wagon to Flipkart probably represented its best shot at winning in India.
In a call with investors, Walmart management reposed strong faith in the existing leadership at Flipkart and its subsidiaries including Myntra and PhonePe. Walmart's local business runs 21 Best Price cash-and-carry stores and a fulfilment centre that supports 19 cities across nine Indian states. The steepness of the decline was a bit surprising, if only because news reports had been indicating for weeks that a deal of this scale was likely around the corner. This can only mean that the discount wars in India's e-commerce are set to play out with greater ferocity.
If Walmart continues the same model and Flipkart complies with all conditions after acquisition there would no violation of FDI violation and the deal would not require any approval.
Flipkart is India's largest e-commerce group on the basis of sales but has been fighting off a huge challenge from Amazon. Walmart India's current president and CEO, Krish Iyer, would remain in his role. "This will provide them around 54 million active online buyers and a company with 40 percent of the Indian online retail market".