Published: Fri, May 11, 2018
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Walmart buys majority stake in Flipkart

Walmart buys majority stake in Flipkart

The CPI (M) said on Thursday that the deal facilitates the back-door entry of foreign capital to take over India's huge multi-crore retail trade sector.

Flipkart has a database of over 100mn users, giving Walmart a significant footing within one of the world's fastest growing digital economies with a number of digital companies such as Paytm having emerged in recent times. Walmart and Flipkart will remain separate brands and the Indian e-commerce company will have an independent Board, which will be revamped to give representation to the U.S. firm.

Walmart will own about 77 percent of Flipkart, with the rest held by some existing shareholders, including co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft Corp. The seller community had previously rued that they were not kept in the loop on the protracted talks that had been going on between Walmart and Flipkart for many months, before the deal was sealed.

He said the government should immediately frame a national policy for e-commerce and constitute a regulatory authority to regulate e-commerce business in India and till such time, the deal should be put in abeyance by the government and a close scrutiny should be held of the entire deal.

"We are actively working to shape the portfolio of geographies and businesses we're in, in order to set the company up for success for another generation", Walmart CEO Doug McMillon said in a conference call Wednesday.

Mahajan also alleged that Flipkart's operations are "not beyond suspicion" and that its group companies have not filed their statement of accounts for the year 2016-2017, 2015-2016 and have only made partial disclosures.

Krish Iyer, Walmart India's president and CEO, on Thursday told Press Trust of India: "We now have 21 stores and plan to open 50 stores in four to five years".

The combination with Walmart could be controversial, with concerns about how a deal might affect India's smaller retailers. "It is pretty clear that this (deal) is good for customers and would create jobs and help society", he said at a select media roundtable here. For PM Modi, appeasing small traders and farmers, who are part of the BJP's core constituency, is as important as upholding India's image as a place that welcomes foreign investment. Walmart has failed to build its own business since 11 years of being able to operate in India.

Fashion and electronics are the two largest drivers for Flipkart.

Sources say that Sachin does not agree with Walmart's proposed strategy and operating structure after the deal is over.

It said it is common knowledge that Walmart sources its products from worldwide markets. Till now, as per the company claims each of its India outlets has turned profitable at the store level. Last year, however, the company's valuation dropped to about $12 billion, and the duo lost their billionaire status.

The deal is also sure to trigger envy and hunger in many other startups to follow in the lines of Flipkart.

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