Walmart will acquire about a 60-per cent stake, while Alphabet will take around 15 per cent for about $3 billion, Reuters reported. Armed with a go-ahead from the Reserve Bank of India, it is preparing to make a big push into digital payments and compete with the likes of Paytm, Freecharge and Flipkart's payment business PhonePe.
While Flipkart is reportedly inching closer to sealing the deal to sell its majority stake to the U.S. retail giant for at least United States dollars 12 billion, SoftBank is yet to finalise on the portion of its 20 per cent holding it will sell and the time of the deal. However, this could not be independently confirmed.
- Bought online apparel retailer Myntra in a deal pegged by sources at about $300 million in 2014, and another retailer Jabong for $70 million in 2016.
Together, Flipkart and Amazon control majority of India's $30 billion e-commerce market that is forecast to grow to $200 billion by 2026 (Morgan Stanley estimate). The investment will help accelerate Flipkart's innovation on behalf of customers and will underscore Walmart's commitment to sustained job creation and investment in India.
SoftBank declined to comment.
Bloomberg reported Friday that Flipkart's board has approved the sale of a roughly 75-percent stake to the Walmart group, which also includes Google parent Alphabet. South Africa-based Naspers Ltd and Microsoft Corp will also keep small holdings in the new company. The deal however fell apart after Snapdeal's founders decided against the deal. Efforts by Walmart to win over Flipkart initially became public past year. However, Willmart will retain co-founder Binny Bansal and CEO, Kalyan Krishnamurthy.
Of the major institutional investors and venture partners, besides Soft Bank, Tiger Global has 20.55 percent stake, Nasper 12.83 percent, Accel Partners 6.44 percent and Tencent 5.69 percent among others.
Amazon is believed to have offered Flipkart a higher valuation of about $22 billion, along with a break up fee of $2 billion, compared to Walmart's $18-20 billion valuation of the Bengaluru-based company.
Amazon has been gaining ground quickly on Flipkart and tried to derail the Walmart transaction at least in part because it will fortify the Indian rival. Sources revealed to Times of India, that Bansal "wasn't aligned with the strategy and operating structure that was being proposed post Walmart coming on board".
While most market experts see this deal as a significant development for the Indian start-up industry, a section is still wary of its benefits to Walmart, which is paying a huge price for the online marketplace.
The fresh funds will provide more arsenal to Amazon.In, which has been aggressively investing in expanding infrastructure and adding solutions to enhance consumer and seller experience.