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Walmart buys 77% stake in Flipkart; RSS wing terms it 'back-door entry'

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Walmart buys 77 percent stake in Flipkart for USD 16 billion

The SJM, which is the economic wing of the Sangh, claimed that Walmart is using e-commerce route to circumvent existing rules, which bar foreign companies in multi-brand retail and dubbed its acquisition of Flipkart a "back-door entry" into Indian market.

Sharma expects online grocery to be the fastest growing segment in the e-retail space, growing at a 65-70 per cent compounded average growth rate (CAGR) to touch $100-billion in revenues by fiscal 2020.

The deal hasn't gone down well with the tens of millions of small traders who for years used political muscle to slow the arrival of global retailers.

"If there's one thing we can learn from the recent Flipkart saga, it's this: never count out Walmart".

Walmart now operates 21 cash-and-carry wholesale stores in India, serving small businesses, after entering the country in 2009 through a joint venture with an Indian firm. JD.com will also serve as the online shopping platform for over 20 Walmart stores across China.

Walmart executives said they were particularly interested in PhonePe, Flipkart's mobile payments app, along with its fashion sites Myntra and Jabong.

Today, Indian e-commerce industry is already close to United States dollars 30 billion in size and analysts expect this to zoom to USD 200 billion by 2026.The growth of the sector was comfortably in sync with the meteoric rise of Flipkart.From a modest two-bedroom apartment in Koramangala, the Bengaluru-headquartered company now has multiple offices across the country. India is the next big potential prize after the US and China, where foreign retailers have made little progress against Alibaba Group Holding Ltd.

The deal, reportedly worth around $15 billion (roughly Rs. 1 lakh crores), is expected to be announced officially later Wednesday, with Walmart CEO Doug McMillon in Bengaluru, where Flipkart is headquartered.

In a statement issued on Wednesday, Walmart said it would eventually look at the public listing of Flipkart as a majority-owned subsidiary though the company did not share a timeline for this.

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The last major reorganization within Flipkart came in early 2016 when Tiger Global brought in Binny Bansal as CEO and later reinstated Kalyan Krishnamurthy to the position. In announcing the deal, Walmart warned its shareholders that the purchase would reduce its net income by at least $750 million this year and by more than double that amount next year. The big advantage that Amazon always had over Flipkart was the unlimited cash it could plough into the growth of its Indian business.

Flipkart's stock options are granted over a four-year period, with employees allowed to vest them every month after a one-year threshold. This is an extension of Walmart's global expansion strategy. Walmart's deal makes Bansal's success even more important, considering the fact that several analysts had literally written off Flipkart few years back after it ceded substantial market share to Amazon.

Home to 1.3 billion people, India has seen the size of its middle class surge.

The board of directors of Amazon Seller Services passed the resolution at their meeting on April 26, 2018, it added.

Right now, Walmart is running 21 wholesale shops in India.

Going forward, the need to connect with consumers will become more intense, and online will continue to evolve as an increasingly attractive channel for distribution. Only user choice should be improved, with a greater range of Walmart private labels differentiating the merchandise.

The announcement also shows that a late, albeit unconfirmed, bid for Flipkart by Amazon, was rejected. However, this does not mean that they will be forced to exit.

Retail majors, including Kishore Biyani of the Future group, too, watched the deal with interest and told Business Standard that strategic deals with online players would be the future of retail in India.

As for its Flipkart deal, the firm is presumably celebrating it today.

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