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FLIPKART AND WALMART MERGER

Flipkart and Walmart Merger

FLIPKART AND WALMART MERGER

Have you know about Flipkart and Walmart merger? If not, here is the blog that will give all about at one place. Global retail giant Walmart plans to pump $2-3 billion (over Rs 13,000 crore) as fresh equity into Flipkart to strengthen its hold on the e-commerce company, while buying existing shareholders for a majority control in a deal that is expected to be announced this week.

A number of key shareholders in India’s largest online retailer Flipkart have agreed to sell their stakes in the Bengaluru-based company to Walmart but the biggest of them, Soft-Bank, is holding out for a better price. Walmart has reached an agreement on buying the stakes of New York-based investment firm Tiger Global Management, South African media conglomerate Naspers, venture capital firm Accel and China’s Tencent Holdings, they said. Flipkart founders, Sachin Bansal and Binny Bansal may sell a part of their stake in the company. These six shareholders collectively hold more than 55% of Flipkart.

Sources said Walmart has lined up “significant” investments in setting up cold chains, stepping up sourcing for global operations, building a supply chain, setting up modern warehouses and building partnerships with kirana stores. “There are plans to make significant investments in India in various areas to set up a global scale business,”  Besides buying shares from existing investors,

Walmart is also expected to infuse fresh capital into Flipkart, which may push the size of the deal to $10-12 billion.

For a little over billion dollars, Alphabet, the holding company that owns tech giant Google, may finally get the algorithm to reach out to its next billion users. Through the Walmart route. According to multiple sources and reports, Google is all set to shell out close to $1.5 billion in the $12-billion deal where Walmart is trying pick up a controlling stake in Flipkart. This deal would help Google gain “invaluable data’’ which would allow it to access users it has been wanting for its ambitious ‘Next Billion Users’ plan.

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Flipkart is not only the largest e-commerce player in the country, it is also the most trusted brand, according to market statistics and reports. So with this investment, Google would get a deep insight into customer buying pattern. It is something which it has not been able to crack even after being the top search engine in the country and launching a payments platform.

“Google would get accurate user data on what all people buy. This will help them get knowledge on each and every customer and then they can push products accordingly,’’

After the merger with Walmart, Google would be able to create more than accurate customer profile,” said a senior analyst with an international consultancy.

With just the formal signatures pending for a deal with Flipkart, Walmart has begun its search for real estate, mostly in Bengaluru, to have synergies with the e-commerce company headquartered there, sources said.

The American retail major is looking at shifting some critical divisions such as information technology (IT) and e-commerce to Bengaluru from Walmart India’s Gurugram office.

Synergies are being planned on other fronts too. If things go according to plan, Walmart India and Flipkart could possibly have one common leader for both businesses.

It is not certain yet who that leader would be, but one of the Flipkart founders (Sachin Bansal and Binny Bansal, who are not related) could be a possible choice, according to a source. However, if Sachin Bansal sells his stake at a little over 5 per cent and steps down from Flipkart, as reports have suggested recently, either Binny Bansal or Kalyan Krishnamurthy, chief executive officer (CEO) of Flipkart, could be an option for the leadership position.

Will a Flipkart-Walmart merger pose a threat to Amazon in India? Walmart net revenue of 2015 crosses $500 billion and amazon stays below $120 billion. But there is a problem Walmart revenue share in ecommerce is barely $15 billion of 2015 and amazon beyond $100 billion. Walmart power is very powerful but currently in offline retail only. Amazon is very much experience in e commerce . That’s why its at top on no.1 position in India. Experience is much more powerful than money. So it is a big threat to Amazon.

Hence It is to be concluded that synergies are being planned on other fronts too. If things go according to plan, Walmart India and Flipkart could possibly have one common leader for both businesses. Walmart is likely to bring its managerial expertise, although the existing leadership in Flipkart is expected to stay as they “understand the market well”. Flipkart is set to sell more than 70% stake to Walmart and Google’s parent Alphabet in a deal, which will value the company at $20 billion.

Analysts said they expect a large chunk of the fresh investment in strengthening back-end infrastructure. They said with acquisition of Flipkart, Walmart will be able to extend its expertise in managing physical goods in the digital space.

If you want to share your views, feel free to mail us at info@itslyf.com

-Geetika Goyal (Team Itslyf)

Flipkart and Walmart merger

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