Walmart makes a $16 billion bet on India's booming economy

Flipkart Chart3

Flipkart Chart3

The Walmart-Flipkart deal may become a blessing in disguise as almost hundreds of current and former employees of Indian e-commerce giant are set to turn into dollar millionaires overnight.

Flipkart will be listed on Indian stock exchanges as a fully-owned Walmart subsidiary down subsequent years.

"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 eCommerce in the market", said Doug McMillon, Walmart's president and chief executive officer.

With the Walmart deal, however Sachin Bansal stands to attain his billionaire status again, as he will offload his entire 5.5% stake in the company to Walmart, earning him about $1 billion, Bloomberg reported. The deal values Flipkart at $21 billion, catapulting it among the most valued internet startups in the world.

However, a deal done on paper is still subject to regulatory approvals. While the first phase was dominated by hyper-competition, extreme growth and the battle for gaining market share at any cost, it also led to a lot of players betting on wrong business models.

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On Thursday, Sachin Bansal, who co-founded Flipkart in 2007 with college mate Binny Bansal, confirmed his departure in a Facebook post. The apparel segment has the second highest share of 31 per cent in the e-commerce retail industry. In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States by market capitalization.

And, in 2018, Flipkart joined Walmart, when Walmart Inc announced on 9 May it had signed definitive agreements to become the largest shareholder in Flipkart Group.

Businessmen directly related with Flipkart feel the deal will help the company to grow rapidly in a highly competitive Indian e-commerce market with generating more business for them. However, Economic Times reports that the co-founder was an integral part of the deal until a few weeks ago.

However, Assocham Secretary General D S Rawat has said he sees the Walmart-Flipkart deal as a salute to the success of an Indian start-up that pioneered the fledgling online retailing in a country where bulk of the trade is in the unorganised sector. And if India is to see its own retail businesses reach the kind of scale one sees in China, with retail chains of thousands of stores, an argument can be made as follows: unshackle the local business houses and open up FDI in multi-brand retail and see them grow at the proverbial 10X. "But I'll be watching and cheering from the outside Flipsters, you better continue to do a good job!" Walmart's investment in Flipkart is largely reflective of the maturity of the Indian e-commerce system.

Accel India operates under US-based Accel's banner but is managed and run independently. The deal will only benefit investors, venture capitalists and promoters.

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