Walmart-Flipkart deal: Sachin Bansal announces exit from company

Amazon founder Jeff Bezos has committed investments to the tune of $5 billion for the Indian market

US-based online marketplace eBay plans to sell its stake in Flipkart for about $1.1 billion, and will relaunch eBay India focusing initially on cross-border trade opportunity, the company said in a statement. Flipkart claims it has over 1.3 lakh sellers on its platform.

The acquisition makes the $500-billion Walmart the largest shareholder of the city-based Flipkart group and will help accelerate its mission to transform e-commerce through digital technology. The investment will include US$2 billion of new equity funding.

US supermarket chain Walmart is making a major play for India's e-commerce market, dishing up USD$16bn (£11.82bm) for a 77% stake in local player Flipkart. The companies said they're also in talks with other potential investors, which could result in the US company's stake being lowered, though it will retain majority ownership.

Rohan Bhargava, Co-founder at CashKaro.com, Ratan Tata & Kalaari Capital backed Cashback & Coupons Site remarked, "The Flipkart-Walmart deal is set to change the competitive landscape of Indian e-commerce". While the deal was being watched by world leaders, back home there were voices of protest.

While the earlier UPA-2 government had allowed FDI in multi-brand retail, the BJP-led NDA government has been against it, making it hard for foreign companies to expand in India by opening new stores. However, his exit seems to have been driven by the fact that Walmart did not see a role for both the co-founders on the board of the e-commerce startup. This would give Walmart access to the fast-growing online retail space in the country.

In a country where many still see paying online with credit or debit cards as risky, Flipkart earned millions of customers in its early years by allowing buyers to pay cash on delivery. Now with Walmart on Flipkart's side, Flipkart can actually do the same and the battle for acquiring the next 100 million Indian online shoppers.

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Morgan Stanley has estimated the e-commerce market will grow to $200 billion in India in about a decade, and online sales are growing at about 35 per cent a year.

Analysts believe Flipkart's sales are the highest in the Indian e-commerce sector, but over the past five years, it has faced a strong challenge from Amazon, which considers India its main target market in India.

In its news release, Walmart also cast the acquisition as creating jobs within India's economy and supporting small business, even giving a nod to Prime Minister Narendra Modi's "Make in India" campaign.

Walmart said Flipkart's logistics, payments and apparel businesses offer new areas of growth.

In an interesting twist, this time Walmart is snapping up a company started by none other than two former Amazon employees. "Walmart is the ideal partner for the next phase of our journey", Bansal said. "This investment is of huge importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India". Binny Bansal, meanwhile, will retain his 5.5 per cent stake in the company and remain Flipkart Group CEO.

Last year, Kalyan Krishnamurthy, previously an executive in Flipkart investor Tiger Global, took over as Flipkart CEO.

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