With CEO in India, Walmart set to announce Flipkart deal today

Masayoshi Son, chief executive of Japan’s SoftBank, had earlier confirmed to reporters in Tokyo that the Walmart-Flipkart deal had been agreed.

Bentonville, Arkansas-based Walmart will acquire about a 60 percent stake in Flipkart, while Alphabet will get a roughly 15 percent stake in the online marketplace for about United States dollars 3 billion, a Reuters report said. Walmart also plans to pump $2 billion (nearly Rs 13,000 crore) as fresh equity into Flipkart to strengthen its hold on the e-commerce firm.

The world’s wealthiest family has just bestowed billionaire status on two of India’s most feted tech entrepreneurs. Analysts claim Walmart is eyeing to tap the massive potential in Indian online shopping sector, whose market is still considered to be at a nascent stage.

Currently, Tiger Global is second highest stake holder in Flipkart with 20.5% stake, whereas Tencent and Microsoft have 6% stake each in the company.

India is the next big potential prize for global retailers after the USA and China, where foreign retailers have made little progress against Alibaba Group Holding.

Vision Fund invested in Flipkart previous year, with its $2.5 billion stake now worth $4 billion, Son said.

The buzz is that Flipkart’s co-founder and executive chairman Sachin Bansal will sell his 5.2 per cent stake to the USA brick-and-mortar behemoth and likely exit completely.

The deal is subject to regulatory approval. Amazon’s market cap now stands at $776 billion.

With Sachin’s exit, Binny Bansal is expected to take up the role of chairman while Flipkart CEO Kalyan Krishnamurthy is expected to be a part of the company after the deal, as per the financial daily. There have been months of consideration that Walmart was planning to buy Flipkart, but both have repeatedly declined to comment on the talks.

The investment will help accelerate Flipkart’s customer-focused mission to transform commerce in India through technology. The company seems to be keeping up its investment momentum in FY19, with flagship programmes such as prime and planned expansion of its warehousing and logistics arms sucking up major cash this year. “The final make-up of the board has yet to be determined, but it will also include independent members”, Walmart said. “In the mid-to-long term, as the business scales and efficiencies are realised, Walmart expects losses to decline and returns to improve”.

The transaction will likely value Flipkart around $20 billion and Walmart will likely acquire around a 74% stake in the company, mostly by buying shares from existing investors. Walmart has acquired 77% stake in Bengaluru-based online shopping portal for a valuation of around $21 billion.