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Walmart currently operates 21 Best Price cash-and-carry stores in 19 Indian cities.

Walmart seizes on Flipkart’s e-commerce potential

CEO McMillon: India is “one of the most attractive retail markets in the world”

For Walmart, buying a majority stake in India’s Flipkart Group was a unique opportunity that couldn’t be passed up: allying with an e-commerce driver in a burgeoning retail economy poised to become a global powerhouse.

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market,” Walmart president and chief executive officer Doug McMillon said Wednesday in announcing the deal for the retail giant to become Flipkart’s biggest shareholder.

Speculation about a possible deal had buzzed for months as media reports followed a chess match between Walmart and retail rival Amazon to come to an agreement with Bengaluru, India-based Flipkart. That appeared to end this past weekend when Flipkart’s board approved an agreement with Walmart.

Walmart CEO Doug McMillon with Flipkart Group CEO Binny Bansal.

Under the pact unveiled Wednesday, Walmart will pay about $16 billion for an initial stake of roughly 77% of Flipkart Private Ltd. The remaining interest in the company will be held by some of Flipkart’s current shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Ltd., Tiger Global Management LLC and Microsoft Corp.

Bentonville, Ark.-based Walmart noted that the Flipkart investment transforms its position in a country with more than 1.3 billion people, robust GDP growth, a rising middle class and “significant runway” for further smartphone, internet and e-commerce penetration. In fact, Walmart said it expects e-commerce to grow at four times the rate of overall retail in the Indian market.

“We are transforming globally to meet and exceed the needs of customers, and we look forward to working with Flipkart to grow in this critical market. We are also excited to be doing this with Tencent, Tiger Global and Microsoft, which will be key strategic and technology partners,” McMillon explained. “We are confident this group will provide Flipkart with enhanced strategic and competitive advantage. Our investment will benefit India, providing quality, affordable goods for customers while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”

Walmart’s investment includes $2 billion of new equity funding, which is aimed at helping Flipkart spur growth. The companies said Flipkart will leverage Walmart’s omnichannel retail know-how, grocery and general merchandise supply-chain acumen, and financial muscle, while Walmart will benefit in India and globally from Flipkart’s talent, technology, customer insights and innovative culture.

“Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart,” Judith McKenna, president and CEO of Walmart International, said in a statement. “This investment aligns with our strategy, and our goal is to contribute to India’s success story as we grow our business. Over the last 10 years, Flipkart has become a market leader by focusing on customer service, technology, supply chain and a broad assortment of products. With Flipkart and the other shareholders who have come together, we will continue to advance the winning e-commerce ecosystem in India.”

Flipkart is India’s top e-commerce player, ahead of No. 2 Amazon. Founded in 2007, Flipkart brings to the table a powerful technology foundation, including artificial intelligence, and leadership in such market segments as electronics, large appliances, mobile, and fashion and apparel. The company’s supply chain arm, eKart, serves more than 800 cities and makes 500,000 deliveries daily.

For its fiscal year ended March 31, Flipkart posted gross merchandise volume (GMV) of $7.5 billion and net sales of $4.6 billion. Both figures represent more than 50% year-over-year growth.

“This investment is of immense 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,” according to Bansal, who is group CEO at Flipkart. “While e-commerce is still a relatively small part of retail in India, we see great potential to grow. Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and e-commerce to the fore.”

Walmart India currently operates 21 Best Price cash-and-carry stores and one fulfillment center in 19 cities across nine states in India, with more than 95% of sourcing coming from India. The company said Krish Iyer, president and CEO of Walmart India, will continue to lead that part of the business.

Walmart and Flipkart said they’re also in talks with other potential investors but noted that Walmart would retain majority ownership. Plans call for Tencent and Tiger Global to continue on the Flipkart board, joined by new members from Walmart. The final makeup of the board is still being determined yet will include independent members, the companies said.

The transaction is expected to be finalized later this calendar year, pending regulatory approval in India.

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