Softbank chief confirms deal to sell Flipkart
- Author: Zachary Reyes May 09, 2018,
May 09, 2018, 17:08
The country's larget deal through the M and A route, is nearly done, as the the Flipkart campus at Bengalurus Embassy Tech Village was dressing up for a town hall meeting with president and chief executive officer of Walmart Inc, Carl Douglas McMillon. SoftBank's Vision Fund, the world's biggest private equity fund, had invested $2.5bn in Flipkart last August.
Mumbai: Global retail giant Walmart has formally agreed to buy a controlling stake in Flipkart. The new Flipkart will have Binny Bansal as the new chairman and group CEO, while its co-founder Sachin Bansal will make an exit after selling his share of the company.
Sachin and Binny Bansal, both former Amazon.com Inc employees, founded Flipkart in 2007, and like their USA rival, began by selling books. However, the latest funding can be read as a sign that Amazon isn't stepping on the brakes in India, and if anything, is only going to ramp up its investments to try and win in the country.
Analysts said the deal helps Walmart gain a foothold in Indian retail without having to open commercial stores which is problematic under Indian foreign direct investment rules.
The company began its India journey after tying up with Bharti Enterprises in 2007. But Walmart has deep pockets to aid Flipkart and retailing experience since decades from marketing to logistics.
Online sales in India were worth $21bn past year, according to market research firm Forrester. No other market except China and U.S. can compete in terms of total retail opportunity.
To finance the investment, Walmart intends to use a combination of newly issued debt and cash on hand.
Not just Sachin but major shareholders in Flipkart are also expected to sell their entire stake, including SoftBank and Nasper. Even so, the company would retain clear majority ownership.
The company's board has seven members. The board will work to maintain Flipkart's core values and entrepreneurial spirit, while ensuring it has strategic and competitive advantages, Walmart said in the release.
"It's not like BigBasket is scared of the prospect of battling Amazon and Flipkart-Walmart", a source told Mint. Including fashion portals Myntra and Jabong, it controls 34 percent of India's online sales, based on Euromonitor data, followed by Amazon, with 27 percent.
The retail giant declined to give a specific timetable on profitability, saying only that Flipkart's losses should decline "in the mid to long term".