Walmart buys 77pc stake in India's Flipkart for $16b

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Hours after it was confirmed that US-based retailer Walmart Inc was acquiring Flipkart, the latter's co-founder Sachin Bansal Wednesday announced his exit from the company. Walmart CEO Dough McMillon has landed in Bangalore to announce the deal officially. Moreover, from Amazon's perspective, its domination as the global online retailer has forced its biggest American rival, Walmart, to fork out $16 billion for what is easily one of the most expensive acquisitions ever-a clear acknowledgement that Walmart is trying hard to make up for lost time by not investing more aggressively on e-commerce earlier.

Sachin had once categorically said in an interview that he will never sell Flipkart, but after seeing ups and downs in business through 11-years, the e-commerce co-founder has finally quit.

"This investment is of vast 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", said Binny Bansal, Flipkart's co-founder and group CEO. While Walmart's investment in Flipkart is a good sign for India's startup ecosystem, it did come with one big surprise.

E-commerce sales in India hit $21 billion a year ago according to market research company Forrester, and are expected to soar as its population of 1.25 billion people make greater use of internet access.

The blockbuster takeover threatens a major blow to rival Amazon's ambitions in India.

Why is the Flipkart-Walmart deal so important?

"While eCommerce is still a relatively small part of retail in India, we see great potential to grow".

During a recent investor call, Amazon CFO Brian Olsavsky had said the company would continue to invest in India as it sees?great progress? with both sellers and customers here, even though as the United States e-tailing giant had registered a loss of Dollars 622 million from global operations in the first quarter of 2018. "Walmart clearly doesn't want to be left behind in the race as India is a critical piece".

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The announcement ended months of speculation that Walmart, the world's biggest retailer, was preparing to take over Flipkart.

The transaction - the worst-kept secret in Indian business - is a milestone for India's internet industry.

The payout is the first time than any of India's generation of internet entrepreneurs have seen their multi-million dollar valuations translate into cold, hard cash on such a scale.

The benefits to Walmart are less certain.

Flipkart's sales grew more than 50% in its most recent fiscal year to $4.6 billion, Walmart said, compared with $11.5 billion for Walmart's USA e-commerce business.

Walmart's strength has always been its physical stores.

"Flipkart will diversify its inventory to attract more Indian consumer segments that haven't started shopping online", said Lee.