Walmart Flipkart Deal To Be Sealed But With A Catch

Angelica Greene
May 15, 2018

Softbank had also invested about $900 million in Snapdeal in the hope the e-tailer would be able to challenge Flipkart's market leadership.

"Holders of 60% of the Flipkart shares held by the minority shareholders, acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of closing of the transactions", said Walmart in the filing. However, in line with the recent Walmart-Flipkart deal agreement, SoftBank can go ahead with the investment only after it exits from Flipkart.

After competing against Amazon for years in e-commerce, Walmart revealed on May 9 that it outbid the tech giant for Flipkart and will pay $16 billion to buy a 77 percent stake in the Indian e-commerce company.

This is the first ever big deal in the e-commerce world. But over the weekend, Walmart lifted a bit of the veil by indicating that this was an offshore transaction under which Walmart Inc and its fully-owned subsidiary, Walmart International, would acquire the stake in Flipkart Private Limited, a Singapore-based entity that virtually controls the Flipkart empire, which houses nine entities. According to the market research firm, Forrester, India's online retail sales amount to $27 billion and are projected to grow at a compound annual growth rate of close to 29 per cent between 2017 and 2022.

In e-commerce market, two retail chains are set to create history by joining hands.

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On May 09, the Swadeshi Jagran Manch (SJM) wrote a letter to prime minister Narendra Modi opposing the deal.

Founded in September 2007 by IIT-Delhi classmates Sachin Bansal and Binny Bansal, Flipkart started off as an online bookstore and evolved into an e-commerce marketplace. The SJM is an affiliate of the Hindu nationalist association, Rashtriya Swayamsevak Sangh (RSS), which is the ideological mothership of the ruling Bharatiya Janata Party.

While the startup ecosystem is rejoicing at Walmart's $16 Bn boost to Flipkart, CEO Kalyan Krishnamurthy has his eyes firmly focused on ensuring that his team continues delivering to take on the competition.

The Arkansas-headquartered company will also have the final word on the appointment or removal of the top executives at Flipkart and its group companies, PhonePe and eKart. The IPO will be done "at a valuation no less than that paid by Walmart" for this buyout, the SEC filing said.

This, despite some degree of dissatisfaction within Flipkart over how much present and past employees can cash in. But in January 2017, Flipkart's board had reportedly chose to take the company public within two years. Walmart has been embracing a more acquisitive approach to ramping up online growth, rather than attempting to do so organically, given the importance of rapidly building scale as other fast-growing online competitors such as amazon RPT amazon keep expanding.

Other reports by GizPress

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