Walmart has won the bidding to acquire Indian e-commerce platform Flipkart, beating Amazon to the deal. The US company will pay USD 16 billion to acquire a 77 percent stake in Flipkart from shareholders such as Softbank (20%), Naspers (11%) and eBay. Flipkart's founders as well as Tencent, Tiger Global and Microsoft will continue to hold minority stakes. Walmart said it will build out the Indian platform in the near term, ahead of an eventual IPO for Flipkart.
Founded in 2007, Flipkart has been a pioneer in developing e-commerce in India, a market Walmart said it expects to grow four times faster than traditional retail. In the fiscal year ended 31 March, Flipkart sold merchandise with a gross value of USD 7.5 billion and recorded net sales of USD 4.6 billion, representing more than 50 percent year-over-year growth in both cases.
Walmart already has a limited presence in India, with 21 Best Price cash-and-carry stores and one fulfillment centre, covering 19 cities across nine states in India. Flipkart’s supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.Walmart’s investment includes USD 2 billion of new equity funding, which will help Flipkart accelerate growth in the future. Walmart and Flipkart are also in discussions with additional potential investors who may join the round, which could result in a lower, but still majority stake for Walmart after completing the deal.
While Walmart sees good long-term prospects for the Indian market, the acquisition will have a negative impact on its earnings in the near term due to operating losses at Flipkart. The deal will reduce FY19 EPS by an estimated 25-30 cents and FT20 earnings by around USD 0.60 per share as the company ramps up investment in the market and sees interest expenses increase from financing takeover.
