Explainer: eBay sells Flipkart stake, announces plan to relaunch eBay India

Share

World's largest retailer Walmart on Thursday tried to assuage concerns around its $16-billion (roughly Rs. 1.07 lakh crores) takeover of Flipkart, saying the deal is good for India as it will help create millions of jobs over time and help the economy through local sourcing of goods by the company.

E-commerce firm Flipkart has sought to assure its 150,000 sellers of operational continuity, amid fears of Walmart's private labels hogging digital shelf space as a result of the U.S. retailer's recent investment deal.

The acquisition of the majority stake makes the $500-billion Walmart the largest shareholder of Flipkart group and will help accelerate its mission to transform e-commerce through digital technology. "Also, subject to regulations, there is likelihood of Walmart's cash & carry business being integrated with Flipkart at some point in time-an added kicker", it said.

Addressing fears of sellers and trader associations over the impact of the $16-billion Walmart-Flipkart deal, Kalyan Krishnamurthy, CEO of Flipkart wrote to sellers assuring them that there will be no changes in the operating processes post the deal. While the Bansals (Binny and Sachin) will be rightly lauded for what they have achieved, there are some who will rightly always see them, as one market watcher put it, as "entrepreneuritis interruptus". "We expect increasing competition in organized retail, not only in fashion, lifestyle retailing and durables but also in food, grocery and general merchandise".

The value of the employee stock options would be around $1 million each, said an Economic Times report, which also suggested that the United States retail giant may look to buy back all such shares owned by Flipkart staff, thereby making them rich by at least a million USA dollars. "With Walmart on board, we are committed to doing more of the same". "Entry of Walmart will further create problems for them".

More news: Body in Scotland is missing Frightened Rabbit singer

On Wednesday, Masayoshi Son, chief executive of SoftBank, held a press conference in Tokyo revealing the Walmart-Flipkart deal, and disclosing that SoftBank's $2.5-billion stake in the company, picked up last August, would be worth $4 billion if it chose to exit.

This is the biggest M&A deal in India so far this year. Payment partner PhonePe, an application run by Flipkart, is a payment mechanism that Walmart can blend with its existing settlement programs effectively in connection with online purchases and bill payments.

Nonetheless, the USA brick-and-mortar behemoth has still bagged a significant stake of around 55 per cent. Naspers sold its 11.18 per cent stake in Flipkart to Walmart for $2.2 billion. "Plans are on track", Walmart India president and CEO Krish Iyer said at the roundtable.

On the other side, Flipkart too would benefit from Walmart's know-how and expertise in retail infrastructure management, marketing, supply chain and logistics, it added. Lately, Walmart has been facing a decline in its sale, but with Flipkart, it can increase its market value in India. Founder Jeff Bezos has promised to pump in more than Dollars 5 billion to win the Indian online retail market.

Share