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Walmart agree a $16m deal to buy Indian online retailer Flipkart

Walmart agree a $16m deal to buy Indian online retailer Flipkart

Walmart was upstaged earlier Wednesday when Masayoshi Son, chief executive officer of SoftBank Group, confirmed during a briefing in Tokyo that the USA retailer had agreed to buy control of Flipkart.

SoftBank acquired its stake in the company a year ago through its Vision Fund investment arm. The $16 billion deal will see only $2 billion fresh inflow into the company. Out of the $16-billion investment, Walmart will put in $2 billion in new equity funding, while the rest will be utilised to acquire stakes of existing investors in the Bengaluru-based company.

Walmart's acquisition of Flipkart should not face any policy hurdles in India as the e-commerce major runs a marketplace in which 100% foreign direct investment is allowed. Amazon needs to succeed in another high-growth market to prove it can effectively replicate its model beyond North America, and it has been aggressively expanding in India. Walmart expects the company to grow at a rate of four times the overall retail market in India, according to a press release announcing the deal. Amazon now holds about 27pc of India's burgeoning e-commerce market, according to Euromonitor, where Walmart only operates 21 cash-and-carry wholesale stores in the country that sell to businesses.

U.S. e-tail giant Amazon has infused fresh capital to the tune of Rs 2,600 crore into its India unit, Amazon Seller Services, to strengthen the war-chest of the company against domestic rival Flipkart. In keeping with its longtime tradition, Tiger has also continued to invest in companies in India and other developing countries, participating earlier this year in a $51 million Series D funding for NestAway, a almost four-year-old, Bengaluru, India-based home rental startup. Flipkart co-founder Sachin Bansal will leave the company after this deal. The whole operation involves 100,000 sellers and 8 million shipments a month.

The deal between Flipkart and Walmart is in offing since September 2016, when the two sides had first initiated talks. Both of these numbers had increased more than 50% year-on-year.

Walmart cited estimates that online shopping in India will grow by 36% per year over the next five years.

According to data from market analyst Forrester, the Indian online retail market generated USD$20bn (£14.77bn) past year and accounted for just 2.4% of the country's overall retail industry.

Here are 5 big deals that turnaround the online retail industry of the world. This will make Walmart be a part of local deals across India.

Walmart has also opted to use Tencent's mobile payment system, WeChat; in the process dropping the Alibaba-linked Alipay in all its stores in the western region of China and giving WeChat a significant boost in the battle for China's almost $13 trillion mobile payment market. In addition, the Indian e-commerce operator could tap the latter's supply chain and know-how to penetrate the grocery market. Hogan Lovells won a bidding war almost a year ago for Climan and his technology transactions team, which previously worked at Weil, Gotshal & Manges.

"The deal will create an uneven playing field with retailers unable to compete", he added.

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