Flipkart's acquisition a blow to 'Make in India' campaign: CPI-M

Ivan Schwartz
May 13, 2018

U.S. retail giant Walmart who acquired 77 percent stake in Flipkart for around $16 billion says it will continue to grow its wholesale cash and carry business, adding 50 new stores in the next four-five years. Nonetheless, the U.S. brick-and-mortar behemoth has still bagged a significant stake of around 55 per cent. Naspers sold its 11.18 per cent stake in Flipkart to Walmart for $2.2 billion. The reason for this potential flip-flop is being attributed to a hefty tax burden that a short-term exit from Flipkart will attract for Softbank.

"India is one of the most attractive retail markets in the world, given in its size and growth rate, and our investment is an opportunity to partner with the Flipkart that is leading the transformation of e- commerce in the market", said by Doug McMillion, Walmart's president and chief executive officer at the conference. The $2 billion profit would be taxed as per Indian law. Founder Jeff Bezos has promised to pump in more than Dollars 5 billion to win the Indian online retail market. "India is one of the most exciting markets in the world", said Bob van Dijk, Group CEO, Naspers.

When contacted, a SoftBank spokesperson declined to comment.

Reports suggest that Walmart's acquisition of Flipkart at a valuation of almost $21billion has generated one of the largest pools of wealth for employees in India's corporate history. While both companies claim that the deal will not bring about any major changes to the operations at Flipkart, Walmart is expected to lend its expertise to Flipkart in terms of logistics and supply chain while learning from Flipkart about running an ecommerce entity and how an ecosystem and the different pieces of it work and apply those learnings in other markets.

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"The situation is still very fluid", a source familiar with the development told ET.

He further assured sellers that Flipkart and Walmart would maintain distinct brands and operating structures after the investment.

The report added that Flipakart's remaining shareholders are cofounder and group CEO Binny Bansal (4-5%), Tencent (6%) and Microsoft (1%), while the remaining stake is held by a few small investors and employees.

Mumbai: The deal between Walmart and Flipkart could be a boon for the offline listed retail firms as it would push up their valuation, say analysts. He has already met with representatives from Alibaba and Walmart as well as Jeff Bezos, founder and CEO of Amazon, in this regard, according to media reports.

Other reports by GizPress

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