Buying a stake in Flipkart, which sells everything from soaps to smartphones and from books to clothes, gives Walmart access to India's vast e-commerce market that could potentially be worth an annual $200 billion in a decade, according to Morgan Stanley.
After months and months of rumors, U.S. retail giant Walmart and Indian e-commerce major Flipkart have officially announced their partnership. But Walmart believes India, which has 1.3 billion people, could be among the world's top five e-commerce markets within the next five years.
The same was officially announced masayoshi son CEO of SoftBank the major investor of Flipkart.
"We view a potential acquisition of Flipkart as potentially negative in the shorter term as it likely leads to earnings dilution", he wrote.
For Flipkart's founders, former Amazon employees Sachin Bansal and Binny Bansal (no relation), the deal is a coup.
While Walmart and Flipkart will be working closely together and combining their strengths, they will maintain distinct brands and operating structures, Walmart said in its release.
India is the top developing country for retail investment, on the strength of a growing economy and middle class, and a favorable regulatory environment, according to A.T. Kearney's Global Retail Development Index past year - outpacing even China.
eBay has notified Flipkart and Walmart that it intends to sell its holdings in Flipkart, which will represent gross proceeds of approximately $1.1 billion.
The SoftBank is a most important shareholder in Flipkart post, it invested $2.5 billion throughout its Vision Fund past year in 2017.
The journey of Flipkart started when two IIT-Delhi graduates left their jobs at Amazon to pursue entrepreneurial dreams.
Walmart will pump $2 billion in fresh investment into Flipkart as part of the deal. His Co-founder Binny Bansal, now Flipkart Group CEO, has made a decision to stay on, along with the current Flipkart CEO Kalyan Krishnamurthy. Amazon needs to succeed in another high-growth market to prove it can effectively replicate its model beyond North America, and it has been aggressively expanding in India.
Bansal, who served as Flipkart's CEO for nine years, held a 5.5% stake in the Bengaluru-based company before Walmart bought a 77% stake in it for $16 billion today (May 09). "Among other initiatives, Walmart will partner with kirana owners and members to help modernise their retail practices and adopt digital payment technologies", the company said in a statement. India is rapidly growing but it still has a relatively small middle class.