According to a Bloomberg last week, Flipkart's board agreed to sell a majority stake to Walmart in a deal where there will be SoftBank selling all of its stake in the e-commerce major also. The American retail giant fought off a last-minute bid from Amazon.
Doug McMillon, Walmart's president and chief executive officer said, "We are also excited to be doing this with Tencent, Tiger Global and Microsoft, which will be key strategic and technology partners".
Shares of the USA retailer fell 3 percent. Amazon was up a fraction. This strictly restricts the possibility of Walmart or Amazon to offer discounts by sourcing it from other countries and storing it in their own warehouses.
Baird Equity Research senior analyst lowered his price target on Walmart stock by $10 following the move. "That said, WMT's improving omni-channel relevance adds durability to the company's longer-term growth opportunity". As Walmart scales in India, the company said it will continue to partner to create sustained economic growth across agriculture, food and retail.
While Walmart and Flipkart will be working closely together and combining their strengths, they will maintain distinct brands and operating structures, Walmart said in its release. Now it's made a decision to find a new way around its rival and conquer a huge market in India. Morgan Stanley sees India's e-commerce market growing to $200 billion in around a decade.
In the years that followed, and a number of funding rounds later, Flipkart raised $1.4 billion from Tencent, eBay and Microsoft, and $2.5 billion from SoftBank's Vision Fund. The aim is to aid Flipkart in accelerating future growth. - Interest expense of about 15 cents a share.
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Perhaps investors are turned off by the specifics of the hit to profitability.
Oliver Rippel, CEO of B2C e-commerce at Naspers, said: "We initially invested in Flipkart in August 2012, and we're proud to have been part of the journey to build the leading e-commerce player in India". Amazon has introduced its Prime video and music services in India in its effort to challenge Flipkart, as well as its annual Prime Day blockbuster sale. But it's not profitable. McMillon has led Walmart's efforts to boost worldwide business. Poor infrastructure complicates home delivery.
However, Amazon would be desperate to make a real kill in the smartphone and fashion markets, since these are two markets where Flipkart always had an edge.
One of the core gains Walmart will get as part of the deal is Flipkart's supply chain arm, eKart, which serves more than 800 cities, making 500,000 deliveries daily.
While Flipkart has enjoyed primacy as India's homegrown retailer - going head to head with Amazon's own growing operations there - it's struggled to maintain profitability, despite a series of investments from overseas.
Overall, industry experts believe that it is a win-win situation for everyone including consumers, investors, Flipkart and Walmart.