The deal will help the United States retail giant - which has seen consumers migrate to online platforms like those run by Amazon - get a vantage position in e-commerce space in the worlds fastest-growing economy.
THE e-commerce market in India is worth billions.
The deal, which wiped away $10 billion of Walmart's market capitalisation as investors reacted negatively in early morning trade on the New York Stock Exchange, stands out for several exits. In its projections, Walmart has indicated that it expects Flipkart's operating losses to nearly double from its fiscal 2017 level of Rs 4,586 crore to Rs 9,111 crore by fiscal 2020.
Indian retail's deal counter will keep buzzing.
Flipkart co-founder Sachin Bansal exited the business by selling his entire stake of over 5 percent for around Rs 7,000 crore to Walmart.
Today, the company sells 80 million products across more than 80 categories and has 100 million registered users, according to its website. On the other hand, Walmart had entered India in 2009 through a joint venture with Bharti Enterprises and later took full control of that venture in 2013. JD.com will also serve as the online shopping platform for over 20 Walmart stores across China.
The entrance of Walmart, with its massive scale, resources and logistics prowess, will certainly put Flipkart way ahead of main competitor Snapdeal and threaten to swamp many smaller Indian ecommerce players.
However, Walmart is said to have made the investment despite the near-term revenue challenges as the "long-term opportunity in a country with a population of 1.3 billion was too large to ignore". India is the next big potential prize for global retailers after the U.S. and China, where foreign retailers have made little progress against Alibaba Group Holding. We are confident this group will provide Flipkart with enhanced strategic and competitive advantage.
But the size of Walmart's Flipkart deal, about five times what it paid in 2016 for jet.com, and the uncertainty of the impact on Walmart's profitability discomfited investors. "Via Flipkart this is not only a backdoor entry, but they are barging into the Indian market".
How does the Flipkart buyout help the Indian start-up ecosystem?
Walmart and Flipkart will remain separate brands and the Indian e-commerce firm will have an independent board, which will be revamped to give representation to the USA firm. A year later, Kalyan Krishnamurthy was elevated to the position of CEO of Flipkart. This is an extension of Walmart's global expansion strategy.
"Even so, the company would retain clear majority ownership", Walmart said.
The board of directors of Amazon Seller Services passed the resolution at their meeting on April 26, 2018, it added.
Walmart isn't new to India. Both of these numbers had increased more than 50% year-on-year.