Walmart finalizes huge investment in Indian e-commerce
Walmart and Flipkart Group closed on a transaction that gives Walmart a 77 percent ownership interest in a business with tremendous growth potential in a nation of 1.3 billion people. The Flipkart Group is one of India’s largest e-commerce marketplaces and includes brands such as Flipkart, Myntra, Jabong and PhonePe.
“Walmart and Flipkart will achieve more together than each of us could accomplish separately to contribute to the economic growth of India, creating a strong local business powered by Walmart,” said Judith McKenna, President and Chief Executive Officer of Walmart International. “Our investment will benefit India by providing quality, affordable goods for customers, while creating new skilled jobs and opportunities for suppliers. As a company, we are transforming globally to make life even easier for customers, and we are delighted to learn from, contribute to and work with Flipkart to grow in India, one of the fastest-growing and most attractive retail markets in the world.”
Flipkart was founded 11 years ago and like Alibaba in China, it has grown rapidly, functioning as a platform that facilitates commerce and less as a traditional retailer. Flipkart offers more than 80 million products across more than 80 categories. The company also operates a supply chain arm called eKart that serves 800 cities and makes 500,000 deliveries daily, according to Walmart.
“We are poised and ready to deliver the full value of this partnership for India,” said Binny Bansal, Flipkart’s Co-Founder and Group Chief Executive Officer. "By combining Walmart’s omni-channel retail expertise, supply-chain knowledge and financial strength with Flipkart’s talent, technology and local insights, we are confident that together we can drive the next wave of retail in India.”
The Flipkart investment transforms Walmart’s position in a country with more than 1.3 billion people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and e-commerce penetration, according to the company. Plans call for future investments by Walmart to support national initiatives and bring sustainable benefits in jobs creation, supporting small businesses, supporting farmers and supply chain development and reducing food waste.
The deal came at a steep price for Walmart compared to other recent transactions and creates a major headwind to profitability. For example, during the current fiscal year, the deal will have a negative 25 cent to 30 cent impact on earnings per share and next year that figure will increase to 60 cents.
Walmart’s $16 billion investment in Flipkart makes the $3 billion the company spent to acquire Jet.com two years ago seems puny.